Depreciated Currency 

and 

Diminished Railway Rates 



AN INQUIRY 



CONDUCTED BY THE RAILWAY WORLD FOR THE PURPOSE OF 

ASCERTAINING THE OPINIONS OF LEADING ECONOMISTS 

AND PUBLICISTS CONCERNING THE PROPRIETY OF 

AN ADJUSTMENT OF RAILWAY RATES TO THE 

DIMINISHED VALUE OF THE MONEY IN 

WHICH THEY ARE PAID. 



RAILWAY WORLD 

Witherspoon Building 

philadelphia 



in 

Depreciated Currency 

and 

Diminished Railway Rates 



AN INQUIRY 



CONDUCTED BY THE RAILWAY WORLD FOR THE PURPOSE OF 

ASCERTAINING THE OPINIONS OF LEADING ECONOMISTS 

AND PUBLICISTS CONCERNING THE PROPRIETY OF 

AN ADJUSTMENT OF RAILWAY RATES TO THE 

DIMINISHED VALUE OF THE MONEY IN 

WHICH THEY ARE PAID. 



RAILWAY WORLD 

Witherspo'on Building 
philadelphia 



tf* 






2 






CONTENTS 



Why this inquiry was undertaken 5 

Text of the circular of inquiry 7 

*List of those whose answers are published 13 

Answers to the first question 17 

Answers to the second question 36 

Answers to the third question 54 

Answers to the fourth question 64 

Answers to the fifth question 77 

Answers to the sixth question 89 

Answers to the seventh question 103 

Analysis of answers, by the Editor of the Railway World . ..122 

*The concluding question on the circular of inquiry was "May 
we publish your reply?" This pamphlet includes every reply in 
which this question was not answered in the negative and every 
reply published is given in full and without revision. 



WHY THIS INQUIRY WAS UNDERTAKEN. 

During the summer of 1908 the daily press gave cur- 
rency to rumors that the railways of the United States 
were considering a general revision of their schedules of 
freight rates with a view to obtaining increased revenue. 
Accompanying these reports were statements that the aug- 
mented cost of conducting the business of supplying rail- 
way transportation had made increased revenue abso- 
lutely necessary if wages were to be maintained at the 
existing level and interest obligations met. It was alleged 
that railway labor was costing vastly more than formerly, 
that locomotives, cars, rails, fuel, supplies and materials 
of all kinds, had increased greatly in cost and that while 
these changes had been in progress railway rates had re- 
mained substantially stationary or had, upon the average, 
declined. 

The meaning of these statements, if they could be ac- 
cepted as accurate, was clearly that there had been a ma- 
terial decline in the value of the money received by the 
railways which, not having been offset by a corresponding 
increase in the sums received for particular services, 
amounted to a genuine decline in railway rates. Further, 
it was plain, that if such a decline had taken place and had 
proceeded so far as to endanger the current wages of rail- 
way employees or to render doubtful the ability to earn in- 
terest on bonds or a fair return to investors, the employees 
of the railways and owners of railway property were 
justly entitled to such nominal increases in rates as would, 
in part at least, offset the real reductions. Such advances 
would be "nominal," only, for though having the form 
and appearance of advances they would in reality consti- 
tute nothing more than a partial readjustment in view of 



the changed value of standard money. They would but 
partially restore the old and accepted relation between 
railway charges and wages and prices. 

Manifestly the real question, the only open question, 
was whether the suggestions made in behalf of the pro- 
posed revision were correct statements of actual facts of 
current industrial life. This question the Railway 
World determined to submit to the leading economists 
and publicists of the United States and to that end a series 
of questions were carefully formulated and a circular em- 
bracing them, together with some explanation of the pur- 
pose in view, was sent to each member upon the last pub- 
lished list of the American Economic Association. The 
entire number of circulars of inquiry sent out was 1,006 
and 103 replies were received of which JJ included per- 
mission to publish. The quality of most of the replies 
submitted by those who gave the desired permission as to 
publication as well as the high authority of those by 
whom they were prepared has made their publication, in 
full, seem desirable. The very few in the following pages 
which fall obviously below the general level of excellence 
are included with the others in order to avoid the neces- 
sity of setting up any standard of selection. 

In submitting this pamphlet the Railway World 
wishes to express its especial gratitude to each of those 
whose attention to its circular and generous permission 
to publish have made it possible. The editors are also in- 
debted to many whose replies cannot be included, because 
such permission was withheld, for courteous and valuable 
suggestions. Thanks are also expressed for a number of 
letters containing much of value and interest which, how- 
ever, not being addressed directly to any of the inquiries 
of the circular, would not sufficiently illuminate the in- 
quiry to warrant the expansion of this publication that 
their inclusion would entail. 



TEXT OF THE CIRCULAR OF INQUIRY. 

The circular of inquiry was dated at Philadelphia, 
Pennsylvania, as of September 14, 1908, and signed by 
the Railway World. The full text of this circular was 
as follows: 

Your attention to the inquiry herewith propounded and the 
courtesy of as prompt and complete a response as your conven- 
ience will permit is respectfully solicited. 

The inquiry is a serious one, intended to serve a serious pur- 
pose, viz., that of aiding to determine the policy of this news- 
paper upon a matter of grave importance and of supplying ma- 
terial and guidance for its public discussion. 

If we are favored with a response, no portion thereof will be 
made public without your consent, but we should be especially 
pleased to receive such consent. 

A letter identical with this is being addressed to each of a 
large number of economists and publicists, for it is believed that 
the nature of the problem is such that the views of trained ob- 
servers of industrial phenomena are particularly certain to in- 
fluence the formation of a wise public sentiment. 

The Problem. 

The statement has been made that, on account of recent rapid 
augmentation of the world's gold supply,* or from other causes, 
gold has depreciated in value and hence the standard dollar of the 
United States is now of less value, i. e., has smaller purchasing 
power, than formerly, (say) from 1800 to 1899. Further, it has 
been stated, that as a consequence of this fall in the value of 
the dollar, those wages, prices and rates which have not been 
adjusted to the changed value of the standard by fully compen- 
satory changes in their relation to the unit of value are really 
lower than formerly, although it may happen that they are now 

*The annual report of the Bureau of the Mint for the year 
1906 gives estimates of the world's yearly production of gold (see 
page 36) from which the following figures for each quinquennial 
period from 1862—66 to 1902-06 have been obtained: 

Years. Fine ounces. Value. 

1902-1906 84,646,918 $1,749,807,300 

1897- 190 1 65,076,311 1,345,246,700 

1 892- 1 896 42,876,543 886,337,100 

1 887-1891 28,490,926 588,959,700 

1882-1886 24,851,094 513,717,700 

1 877- 1 881 26,668,106 551,278,700 

1872-1876 24,367,771 503,727,000 

1867-1871 30,671,358 634,033,000 

1862-1866 30,068,414 621,570,000 



expressed, in terms of that unit, by somewhat higher figures. 

Especially as to railway rates, it is urged by some, that they 
have not, since (say) 1897, been adjusted to this depreciation of 
the standard money in which they are expressed and paid and 
that, in spite of attempts here and there at such an adjustment, 
the generally lower purchasing power of the sums received for 
railway services is equivalent to a very substantial reduction in 
the charges for all, or nearly all, of the services rendered. 

Authorities for this View. 

The following concise statement has been made by President A. 
T. Hadley, of Yale University : 

"It seems also clear that the average increase in rates is 
apparent only and not real. If the price of goods carried 
and wages of railroad laborers and the cost of materials of 
railroad construction and operation have increased from ten 
to forty per cent., an increase of apparent charge of five per 
cent, on the part of the railroads is virtually a tremendous and 
gratifying decrease." — President Hadley in Boston Tran- 
script of April 1, 1905. 

In the admirable essay, which received the first prize in the 
Hart, Schaffner and Marx contest in the year 1906, Dr. Albert N. 
Merritt expressed the same view in greater detail, saying, in 
part: 

"At the same time, coupled with the general prosperity 
which has attended the increased amount of business done has 
come a considerable rise in the prices of nearly all commodi- 
ties, while there has occurred also a considerable advance in 
the rate of wages. For these reasons the cost of operation 
upon our railroads has been greatly increased. 

"Whatever the cause, the fact of this rise in the price of 
services and commodities is incontestable. In other words, a 
smaller quantity of labor and materials can be purchased 
with a given amount of gold coin to-day than could be pur- 
chased six years ago. 

"But a general advance in the prices of commodities ac- 
cording to another way of stating the same fact, is only a 
relative decline in the value of that standard in which prices 
are measured. .When measured in the amount of commodi- 
ties and services which it will buy, gold has therefore de- 
clined about 25 per cent, in value since the period of 1895- 
1899. Wtould it then be unreasonable to expect that gold, 
being less valuable for the purchase of commodities and labor, 
should also be less valuable in the purchase of transporta- 
tion? What are the facts? If we take similar periods for 
the computation of average railway rates, we find that there 
has been no advance whatever, the average rate for the first 
period, 1895-1899, being 7.84 mills per ton-mile, while that of 
1904 was only 7.80 mills per ton-mile. Thus while average 

8 



prices have advanced 25 per cent, there has actually been a 
slight decline in average railway rates. 

"An important distinction is here to be indicated which is 
not often recognized. There are two sorts of rates, which 
may be designated respectively as nominal and real. Nomi- 
nal rates are measured in money,* while real rates consist of 
a percentage of the value of the commodities transported. 
To determine the real rate, that proportion of the value of 
the goods transported, which must be given for the services 
of transportation, must be ascertained. 

"This distinction may at first seem useless, and the method 
of computing real rates certainly refuses to lend itself to ex- 
act statistical analysis. Nevertheless, real rates, such as de- 
scribed are the only proper measure of the relative burden 
of the transportation charges upon the industries of our coun- 
try. Obviously it is of little concern to the producer just 
what may be his absolute money income and expenditure. 
That which is of especial interest to him is his relative in- 
come and his outlay. It is, therefore the proportion of the 
value of his wheat which must be paid for its transporta- 
tion that determines the real burden of the transportation 
charge upon him. On the other hand it is the amount of 
labor and materials which the money received for transpor- 
tation will buy which is of interest to the railroad in deter- 
mining whether or not it can derive a profit from the rates 
charged. If now real rates are accepted as the proper basis 
for determining the course of rates in this country the whole 
situation assumes an entirely different aspect. ... In 

*Mr. H. T. Newcomb has urged this distinction in numerous 
articles. The following was published on January 1, 1904. (See 
The Railway Age of that date) : "Railway charges, like wages 
and the prices of commodities, are measured in money and paid 
in money. The wage-earner, however, cannot eat money nor 
wear it nor shelter himself beneath it. He values it for what 
it will buy, and his wages are worth to him precisely what they 
will buy, no more and no less. If at one time he earns two 
dollars per day he is as well off as on four dollars per day with 
prices all doubled. It is the same with the seller of goods. If 
what he has to pay for rents, fuel, clothing household ex- 
penses and amusements double he is no better off because 
he gets one-fourth more for each article he sells. It is precisely 
the same with the railway, with its employees and with the hold- 
ers of its securities. If the wages of railway employees, the 
cost of fuel, rails, ties, rolling stock, etc., have advanced, the rail- 
ways are better or worse off in proportion as the increase in 
money (nominal) rates has exceeded or fallen short of the en- 
hanced cost of services and supplies. Everyone knows that 
wages and prices have largely increased during recent years. 
Nearly everyone knows that they have, in most cases, gone up- 
ward faster and further than railway rates." — The Work of the 
Interstate Commerce Commission, Gibson Brothers, Washington, 
D. C, 1905. See also Railway Age of August 12, 1904. 



other words, real rates have declined 25 per cent in less than 
ten years."f 

Wages Statistics. 

The annual reports of Statistics of Railways in the United 
States compiled by the Interstate Commerce Commission, under 
the direction of Prof. Henry C. Adams, head of the Department of 
Political Economy in the University of Michigan, and Statisti- 
cian to the Commission, indicate the extent of the depreciation 
of the unit of value in relation to the wages of railway labor. 
The following figures are from the reports for 1897 and 1907 : 



Class of employees. 1897. 

Station agents $i-73 

Other station men 1.62 

Enginemen '3.65 

Firemen 2.05 

Conductors 3.07 

Other trainmen 1.90 

Machinists 2.23 

Carpenters 2.01 

Other shopmen 1.71 

Section foreman 1.70 

Other trackmen 1.16 

Switchmen, flagmen, watchmen 1.72 

Telegraph operators and despatchers . 1.90 
Employees, account floating equipment 1.86 

All other employees and laborers ... 1.64 





Per cent 


1907. 


increase. 


$2.05 


18.50 


1.78 


9.88 


4.30 


17.81 


2.54 


23.90 


3-69 


20.20 


2.54 


33-68 


2.87 


28.70 


2.40 


19.40 


2.06 


20.47 


1.90 


11.76 


1.46 


25.86 


1.87 


8.72 


2.26 


18.95 


2.27 


22.04 


1.92 


17.07 



Statistics of Prices. 

Bulletin No. 75, of the United States Bureau of Labor, shows 
average prices for the following articles used by railways, or, as 
raw materials, for the manufacture of railway supplies : 



Articles. 



Unit. 



Coal, anthracite, broken Ton 

Coal, bituminous, Georges Creek Ton 

Axes, M. C. O. Yankee Each 

Coke, Connellsville, furnace. .. .Ton 
Bar iron, best refined from mill Pound 

Barbed wire, galvanized Cwt. 

Copper wire, bare Pound 

Doorknobs, steel, bronze, plated.. Pair 

Files, 8-inch Dozen 

Hammers, Magdole No. V/ 2 .... Each 

Lead pipe Cwt. 

Locks, common, mortise Each 



$ 3 







Increase. 


.25 


$ 4.20 


29.23 


.83 


1.54 


85.54 


.39 


.68 


74.36 


.62 


2.83 


74.69 


.011 


.0175 


59.09 


.80 


2.63 


46.11 


.1375 


.2402 


74.69 


.166 


.450 


171.08 


.81 


1.00 


23.46 


.38 


.47 


23.68 


.32 


6.71 


55.32 


.0833 


.20 


140.10 



fAlbert N. Merritt, Federal Regulation of Railway Rates, 
Houghton, Mifflin and Company, Boston and New York, 1907, 
pp. 7-10. 



10 



Nails, cut, 8-penny, fence and 

common Cwt. 

Nails, wire, 8-penny, fence and 

common Cwt. 

Pig iron, Bessemer Ton 

Pig iron, foundry No. 1 Ton 

Pig iron, foundry No. 2 Ton 

Pig iron, gray forge, southern, 

coke Ton 

Steel billets Ton 

Steel rails Ton 

Steel sheets, black No. 27 Pound 

Tin, pig Pound 

Tin, plates, domestic, Bessemer, 

coke Cwt. 

Zinc, sheet Cwt. 

Brick, common, domestic M 

Cement, Rosendale Bble. 

Doors, pine Each 

Lumber, hemlock M feet 

Lime, common Bbl. 

Linseed oil, raw Gal. 

Lumber, maple, hard M feet 

Lumber, oak, white, plain M feet 

Lumber, oak, white, quartered . . M feet 

Lumber, pine, yellow M feet 

Lumber, poplar M feet 

Shingles, cypress M 

Lumber, spruce M feet 

Window glass, American, single, 
firsts, 6 by 8 to 10 by 

15 inch 50 sq. ft. 

Window glass, American, single, 
thirds, 6 by 8 to 10 by 
15 inch 50 sq. ft. 



1.33 



2.16 



62.41 



1.49 


2.12 


42.28 


10.13 


22.84 


125.47 


12.10 


23.90 


97.52 


10.10 


23.87 


136.34 


8.80 


20.99 


138.52 


15.08 


29.25 


93.97 


18.75 


28.00 


49.33 


0.019 


0.025 


31.58 


.1358 


.3875 


185.35 


3.18 


4.09 


28.62 


4.94 


7.49 


51.62 


4.94 


6.16 


24.70 


.75 


.95 


26.67 


.81 


1.88 


132.10 


11.00 


22.25 


102.27 


.72 


.95 


31.94 


.33 


.43 


30.30 


26.50 


32.25 


21.70 


36.25 


55.21 


52.30 


53.83 


80.00 


48.62 


16.44 


30.50 


85.52 


30.67 


58.08 


89.37 


2.35 


4.23 


80.00 


14.00 


24.00 


71.43 


2.20 


2.81 


27.73 


1.96 


2.24 


14.29 



The bulletin indicates that putty, Portland cement and Ames 
shovels are the only exceptions to the general rule of greatly in- 
creased prices of railway supplies. 

The same official bulletin gives the following index numbers 
for "all commodities" showing the relation of average prices for 
each year to the average for the ten years from 1890 to 1899, in- 
clusive, thus indicating the real measure of the decline in the 
value of the dollar: 





Index 




Index 


Years. 


numbers. 


Years. 


numbers. 


1897 


897 


1903 


1 13-6 


1898 


934 


1904 


1130 


1899 


101.7 


1905 


H5-9 


1900 


110.5 


1906 


122.5 


1901 


108.5 


1907 


129.5 


1902 


112.9 







We have thus fully stated the problem and repeated arguments 
and information with which you are, of course, fully conversant, 
in order that you may not fail to have before you sufficient facts 
to make our queries particularly clear. May we now ask your 
attention to the following specific inquiries? 



II 



Our Questions. 

i. Are there, in fact and in actual practice, such distinctions 
between (a) nominal wages and real wages; (b) nominal prices 
and real prices, and (c) nominal railway rates and real railway- 
rates as the foregoing quotations suggest? 

2. If there is such a distinction between nominal and real rail- 
way rates, is it important, and what is the extent of its import- 
ance? 

3. Has the American dollar depreciated since 1897 

4. If the American dollar has depreciated since 1897, ap- 
proximately what percentage of its value in that year has it lost? 

5. Wihat effect has this depreciation of the American dollar ( if 
it has depreciated) produced as to wages or prices which have 
not been fully adjusted to the diminished value of the standard? 

6. Were the freight rates charged by the railways of the 
United States in the year 1897, in your opinion, generally too 
high? 

7. Assuming that $1.35 will pay for only as much labor or rail- 
way employees and as much railway equipment, fuel and other 
materials as $1.00 would buy in 1897 and that nominal railway 
rates had been so adjusted that it required $1.10 to pay for rail- 
way service that $1.00 paid for in 1897, would the comparison be- 
tween real railway rates at the different times show an advance 
or a reduction? 

8. M'av we publish your reply? 

We repeat these questions upon a separate sheet, enclosed here- 
with, and also have pleasure in enclosing a stamped and addressed 
envelope for your reply. 

Trusting that you will favor us with your views upon these 
questions, and any pertinent suggestions which you may wish to 
make, and assuring you in advance of our appreciation of your 
assistance, we remain, 



12 



List of Those Whose Answers are Published. 

pages. 
Adams, T. S., Associate Professor of Political Economy, 
University of Wisconsin, Madison, Wisconsin 

17, 36, 54, 65, 77, 89, 103 
Agger, Eugene E., Columbia University, New York City, 

17, 36, 54, 65, 77, 89, 103 
Allen, W. F., Editor, Official Railway Guide, New York City 

18, 36, 54, 65, 89, 103 

Andrews, E. Benjamin, Former Chancellor, University of 

Nebraska, Lincoln, Nebraska 18, 37, 54, 65, 77, 89, 103 

Arbuthnot, C. C, Western Reserve University, Cleveland, 

Ohio 18, 37, 54, 65, 77, 89, 103 

Bacon, N. T., Peace Dale, Rhode Island, 18, 37, 54, 65, 77, 90, 104 

Balch, Emily Green, Associate Professor of Economics and 

Sociology, Wellesley College, Wellesley, Massachusetts . . 104 

Bilgram, Hugo, Machinist, 1235 Spring Garden Street, Phila- 
delphia. Pennsylvania 19, 37, 54, 77 

Blood, John Balch, 10 Post Office Square, Boston, Massa- 
chusetts ,. 19, 37, 55, 66, 78, 90, 104 

Boyle, James E., State University of North Dakota, Grand 
Forks, North Dakota 19, '38, 55, 66, 78, 90, 104 

Brindley, John K, Assistant Professor of Political Economy, 

Iowa State College, Ames, Iowa 19, 38, 55, 90, 104 

Bullock, Charles J., Professor of Economics, Harvard Uni- 
versity, Cambridge, Massachusetts . .19, 38, 56, 66, 78, 91, 105 

Clark, Victor S., Collaborator in charge division of manu- 
factures, economic history, Carnegie Institution, Wash- 
ington, D. C 19, 38, 56, 66, 78, 91, 105 

Clow, F. R., Oshkosh, Wisconsin 19, 39, 56, 66, 79, 91, 105 

Cohn, Morris M., Director, Little Rock Board of Trade, Lit- 
tle Rock, Arkansas 21, 39, 56, 91 

Crook, J. W., Professor of Economics, Amherst College, Am- 
herst, Massachusetts 20, 38, 56, 66, 78, 91, 105 

Crowell, John Franklin, Editor, Wall Street Journal, New 

York City 19, 39, 91, 105 

Crum, F. S., Prudential Insurance Company, Newark, New 
Jersey 21, 39, 56, 66, 79, 9h 105 

13 



Cummings, John, University of Chicago, Chicago, Illinois . 

21, 40, 57, 66,79, 92, 105 

Daniels, W. M., Professor of Political Economy, Princeton 

University, Princeton, N. J 21, 40, 51, 67, 92, 106 

Davenport, H. T., Columbia, Missouri 22, 57, 67, 79, 92, 106 

Dewey, Davis R., Professor Economics and Statistics, Mas- 
sachusetts Institute of Technology, Boston, Massachu- 
setts 22, 57, 67, 79, 92 

Doten, Carroll W., Boston, Massachusetts 

22, 40, 57, 67, 79, 92, 107 

Droppers, Garrett, Lecturer on Political Economy, Univer- 
sity of Chicago, Chicago, Illinois 22, 40, 57, 79, 93, 108 

Emerick, C. R, 12 Massasirt Street, Northampton, Massa- 
chusetts 23, 41, 57, 67, 80, 93, 108 

Fairchild, A. B., Crete, Nebraska 23, 41, 57, 67, 80, 93 

Fairchild, Fred R., Yale University, New Haven, Connec- 
ticut 23, 41, 58, 67, 80, 93, 109 

Fisher, Irving, Professor Political Economy, Yale Univer- 
sity, New Haven, Connecticut 23, 42, 58, 68, 80, 93, 109 

Fisher, Willard C, Wesleyan University, Middletown, Con- 
necticut 24, 42, 58, 68, 109 

Forrest, J. D., Professor of Sociology and Economics, But- 
ler College, Indianapolis, Indiana 24, 42, 58, 68, 80, 94, no 

Fradenburgh, A. G., Adelphi College, Brooklyn, New York. 

24, 42, 58, 68, 94, no 

Garrison, George P., Professor of History, University of 
Texas, Austin, Texas 24, 42, 58, 68, 80, 94, no 

Green, David I., Superintendent, Charity Organization So- 
ciety of Hartford, Hartford, Connecticut, 24, 43, 58, 80, 94, no 

Haney, Lewis H., Assistant Professor of Economics, Univer- 
sity of Iowa, Iowa City, Iowa 24, 43, 58, 80, 94, no 

Hart, W. 0., Lawyer, 134 Carondelet Street, New Orleans, 

Louisiana 24, 43, 58, 69, 81, 94, no 

Hess, R. H., 419 Stirling Court, Madison, Wisconsin 

25, 43, 58, 69, 81, 94, no 

Johnson, Joseph French, Professor of Political Economy, 

New York University, New York City, 25, 44, 58, 69, 81, 94, no 

Kemmerer, E. "W., Assistant Professor of Political Econ- 
omy, Cornell University, Ithaca, New York 

25, 44, 59, 69, 81, 95, "I 

Kinley, David, University of Illinois, Urbana, Illinois 

25, 44, 59, 82, 95, in 

Kursheedt, M. A., 302 Broadway, Manhattan, New York City 

25, 44, 59, 69, 82, 95, 112 

14 



Leeds, Charles H., 50 Suburban Avenue, Stamford, Con- 
necticut 26, 45, 59, 70, 82, 95, 112 

Lough, W. H., Jr., Secretary, New York University School 
of Commerce, Accounts and Finance, New York City 

25, 59, 82, 95, 112 

Lyman, Arthur T., Post Office Box 1717, Boston, Massa- 
chusetts 26, 45, 59, 95 

McCrea, Roswell C, Associate Director, New York School 

of Philanthropy, New York City ... .26, 45, 60, 70, 82, 96, 112 

Martin, John, Grymes Hill, Stapleton, New York 

26, 45, 60, 70, 82, 96, 112 

Meeker, Royal, Assistant Professor of Economics, Prince- 
ton University, Princeton, New Jersey 26, 45, 60, 70, 83, 96, 113 

Mixter, Charles W., Political Economist, 59 Buell Street, 

Burlington, Vermont 26, 45, 60, 70, 83, 96, 113 

MbRMAN, James B., United States Department of Agricul- 
ture, Washington, D. C 26, 46, 69, 83, 96, 114 

Moynahan, George S., 101 Milk Street, Boston, Massachu- 
chusetts 26, 46, 60, 70, 83, 96, 114 

Parish, L. W., Department of Economics, Iowa State Nor- 
mal School, Cedar Falls, Iowa 29, 47, 61, 71, 84, 98, 115 

Newcomb, H. T., Lawyer, Metropolitan Bank Building, Wash- 
ington, D. C 28, 47, 61, 70, 84, 97, 114 

Parmalee, Julius H., 1448 Rhode Island Avenue, Wash- 
ington, D. C 29, 48, 61, 71, 84, 98, 115 

Persons, Warren M., Hanover, New Hampshire 

29, 48, 61, 71, 84, 98, 115 

Plehn, Carl C, Dean, College of Commerce, University of 

California, Berkeley, California 29, 48, 61, 71, 85, 98, 116 

Pope, Jesse E., Former Professor of Economics, University 

of Missouri, Columbia, Missouri ...29, 48, 61, 71, 85, 98, 116 

Powers, H. H., President, Bureau of Universal Travel, Bos- 
ton, Massachusetts 30, 49, 61, 71, 85, 98, 116 

Powers, L. G., Chief Statistician, Bureau of the Census, 

Washington, D. C 30, 49, 61, 71, 85, 98, 116 

Purdy, Lawson, Department of Taxes and Assessments, 
New York City 30, 49, 61, 72, 85, 99, 116 

Quaintance, H. W., Laramie, Wyoming, 30, 49, 61, 99, 116 

Raper, Charles Lee, Professor of Political Economy, Uni- 
versity of North Carolina, Chapel Hill, North Carolina 

30, 49, 62, 72, 85, 99, ii7 

Ray, Walter T., 150 Lloyd Avenue, Edge wood, Pennsyl- 
vania 30, 49, 62, 72, 86, 99, 117 

15 



Richardson, Gardner, Assistant Publisher, "The Inde- 
pendent," New York City 30, 50, 62, 72, 86, 99, 117 

Robinson, Philip A., 107 Antrim Street, Cambridge, Massa- 
chusetts 31,50, 62, 72, 86, 99, 117 

Saeger, Henry R., Professor of Political Economy, Colum- 
bia University, New York City . .. .31, 50, 62, 72, 86, 100, 117 

Smith, J. Allen, University of Washington, Seattle, Wash- 
ington 31, 51, 62, 73, 86, 100, 118 

Stone, N. I., Tariff Expert, Department of Commerce and 
Labor, Washington, D. C 31, 51, 63, 73, 87, 100, 118 

Sumner, George S., Pomona College, Claremont, California 

32, 51, 63, 73, 87, 100, 118 

Symmes, Frank J., Monadnock Building, San Francisco, 

California 32, 53, 63, 73, 87, 100, 118 

Tillinghast, J. A 32, 53, 63, 73, 87, 100, 1 18 

Tuckey, Edson Newton, 214 Comstock Avenue, Syracuse, 

New York 32, 51, 63, 74, 87, 101, 119 

Waller, E. B., Maryville College, Maryville, Tennessee 

33, 52, 63, 74, 87, 101, 119 

Walsh, C. M., Bellport, Long Island, New York 

33, 52, 63, 74, 87, 101, 119 

Warner, A. J., President, Bimetallic Union, Gainesville, 
Georgia 23, 52, 63, 75, 88, 101, 119 

Westenhaver, D. C, Lawyer, Garfield Building, Cleveland, 

Ohio 34, 52, 63, 75, 102, 120 

White, Horace, Editor, New York Evening Post, New 
York City 34, 63, 75, 88, 102 

Wicker, George Ray, Dartmouth College, Hanover, New 
Hampshire 34, 52, 64, 75, 88, 102, 120 

Wildman, M. S., Assistant Professor of Economics, Univer- 
sity of Missouri, Columbia, Missouri, ...35, 53, 64, 76, 88, 121 

Woodford, A. B., Rector, Hopkins Grammar School, New 
Haven, Connecticut 35, 53, 64, 76, 88, 102, 121 

Zartman, Lester W., Yale University, New Haven, Con- 
necticut 35, 53, 64, 76, 88, 102, 121 



16 



ANSWERS TO THE FIRST QUESTION.* 

"I think that there are such distinctions, but that the 
use of two words 'nominal' and 'real' does not help to 
clear them up. The problem is simply: — are railroad 
rates now, in view of the prevailing prices of railway la- 
bor and railway supplies, sufficient to yield the railways 
reasonable profits. I do not believe, on the whole, that 
your present quotations will throw much light on this sub- 
ject. They simply put the principal problem back a few 
years — to 1897, as I interpret your questions. If we agree 
that the prices of railway labor and supplies have increased 
more rapidly than railroad rates, since 1897, we know 
nothing until it is decided whether rates in 1897 were or 
were not more than enough to yield reasonable profits in 
1897."— T. S. Adams. 

"There is no doubt in my mind that underlying the 
whole process of modern exchange is the distinction be- 
tween money prices and what we may call real prices. 
This distinction is applicable to railway rates as it is to 
wages or the prices of commodities in the market. 
Whether the real railway rate is a percentage of value so 
that the real rate varies directly with the price of com- 
modities transported or whether it is something else, I am 
not prepared to say. Certain it is that the actual rate 
means variable returns to the railroads." — Eugene E. 
Agger. 



*The first question was : "Are there in fact and in actual prac- 
tice, such distinctions between (a) nominal wages and real wages, 
(b) nominal prices and real prices, and (c) nominal railway rates 
and real railway rates, as the quotations in our letter of inquiry 
suggest?" 

17 



"Yes — the present nominal wages, prices and railway- 
rates if paid in silver under unlimited coinage would be 
'nominally' the same but not really the same. President 
Hadley is right."— W. F. Allen. 

"Yes, undoubtedly." — E. Benjamin Andrews. 

"There is undoubtedly a sharp distinction between 'real' 
and 'nominal' wages, prices and railway rates to be taken 
into account in comparisons of their relative height at dif- 
ferent times and places." — C. C. Arbuthnot. 

"This is the point that I have been hammering on for 
years. Four years ago in a discussion of the question of 
freight rates regulation with one of the vice-presidents of 
the Pennsylvania Railroad, after he had raised the point 
that they were contented to have matters go on as they 
were rather than adopt the plan urged on his attention, 
though he admitted that it was workable, I brought up the 
point that under the present system freight rates would 
soon become crystallized under a series of judicial rulings 
granting virtually vested rights to established rates to all 
shippers, and that if they could not raise them, they 
would eventually become bankrupt owing to the depres- 
sion of gold, of which ever smaller proportions of the pro- 
duction are used in the arts, and a greater proportion is 
coined."— N. T. Bacon. 

"Since exchange is the sole criterion of value, or of 
price, there cannot be a difference between nominal arid 
real wages or prices. 

"Nominal rates, or indeed, any values or prices are 
never measured in money. A hundred years ago they 
were measured in silver; now they are measured in gold, 
our unit of value, the dollar being a synonym of '23.22 
grains of pure gold.' Not money but the dollar is that in 

18 



which values are measured. Money is our medium of ex- 
change, dollar is a certain quantity of gold. If writers 
would not confound words and their meaning, there 
would be less need for controversy." — Hugo Bilgram. 

"Yes, the following may be taken as general definitions : 

"Nominal prices — Exchange value of commodity in 
dollars. 

"Nominal wages — Exchange value of labor in dollars. 

"Real wages — Exchange value of labor in commodities. 

"Real prices — Exchange value of commodities in labor. 

"The above gives general relations. The fact that labor 
is now more efficient in some cases must be taken into ac- 
count. A new series of definitions and distinctions may be 
made by considering the labor product as a basis instead 
of labor." — John Balch Blood. 

"Yes, undoubtedly." — James E. Boyle. 

"Yes, I think there can be no question on this point. We 
must draw a clear distinction between the real and nominal 
whether or not the course be due to a depreciation of the 
standard, an appreciation of other commodities, or both." 
— John E. Brindley. 

"There are, undoubtedly, such distinctions." — Charles 
J. Bullock. 

"Yes." — Victor S. Clark. 

"Yes." — John Franklin Crowell. 

"Yes, except as to the 'actual practice' if this means the 
everyday thought and usage of the business world. In 
most business transactions the distinction is probably not 
recognized." — F. R. Clow. 

19 



"I think so. There is often great confusion of thought 
and misunderstanding due to the neglect of those very 
distinctions." — J. W. Crook. 

"(a) There is a distinction between nominal wages and 
real wages. In a recent case I tried relating to the rate 
question it was claimed by the railroad company that 
there had, inter alia, been an increase in wages of engi- 
neers. But an engineer on the line of its road testified 
that notwithstanding an increase nominally in his pay 
per hour, the size of engines and trains disables him from 
doubling back in a run of no miles and the haul had 
been increased from 450-600 tons per train to 1,400-2,000 
tons. Rise in price of provisions, groceries and other 
things has also made the increase in wages in some re- 
spects more nominal than real. 

"(b) I am of the opinion that there is a well-founded 
distinction between nominal and real prices. 

"(c) I do not altogether understand what is meant by 
nominal railway rate as distinguished from real railway 
rate. I understand that in as far as a railway rate is pro- 
portioned to value, it can be capable of estimation as a 
burden on the disposition of the article, at a point other 
than the point of production. But rates are rarely made 
on the basis of what the article can bear, except when a 
foreign or distant market is to be thrown open to the arti- 
cles or products of a given section of the country. In such 
cases, the rate is fixed with reference to the value of the 
commodity transported. But for the most part, I take it 
nominal rates obtain. And yet shippers constantly com- 
plain of these nominal rates because they are discrimina- 
tive or unreasonable, and tend to put them out of business. 
So that nominal rates have some reference to value of the 
commodity. Nevertheless a comparison of the rates of 
the railroads, with the increased cost of maintaining them, 
and the increased price received for goods and services, is 

20 



most proper, in my opinion, in order to ascertain whether 
all conditions being considered, the railroads are getting 
what they are entitled to." — Morris M. Cohn. 

"In my opinion, yes. Wages are to the average wage 
earner, what he can purchase with them. Wages of rail- 
way employees differ widely in different parts of the 
United States. The nominal difference, however, is con- 
siderably more than the real difference between the 
North and South, for example. A similar distinction 
though not always quite so clear, exists between nominal 
and real prices and nominal and real railway rates." — F. 
S. Crum. 

"Yes." — John Cummings. 

"Undoubtedly: though, as a matter of phraseology, I 
dislike the expression 'nominal prices.' A price is a fact. 
What you mean by nominal prices is better called relative 
prices, in my opinion." — W. M. Daniels. 

"Real as against nominal (money) wages point to the 
actual purchasing power of the wages as translated into 
the things for which the wages are commonly and gener- 
ally expended ; to talk of real as against nominal prices is 
terminological nonsense. 

' 'Nominal' railway rates can rightly mean noth- 
ing but these rates expressed in money; real rail- 
way rates must mean these rates as translated into 
general purchasing power over commodities in general. 
Unchanged real rates cannot, then, rightly indicate an 
unchanged ratio between the transportation charge and 
the market value of the goods transported, since the pur- 
chasing power expressed in the freight charge is not to be 
assumed — either accurately or approximately to be ex- 
pended in those goods solely which are transported ; labor 

21 



services in general, houses, fuel for railroad use, and a 
wide range of expenditure must disturb the acceptability 
for this formulation. Rather must the test of stability of 
rates be referred to the general principles of the tabular 
or multiple standard." — H. T. Davenport. 

"(a) There is a distinction between nominal and real 
wages. 

"(b) The question is absurd. There is but one kind of 
prices. 

"(c) I do not understand this." — Davis R. Dewey. 

"(a) Yes. 

"(b) No. This is a contradiction of terms unless there 
are two kinds of money in use at the same time, as, for 
example, in a country using inconvertible paper money or 
silver when gold is the real standard. If you have in 
mind difference in price at different periods, this is an 
unhappy way of stating the matter. Which period shall 
we take as the real price period? 

"(c) I cannot regard this as an accurate way of using 
terms having a perfectly definite meaning in the case of 
wages. Same criticism as under (b)." — Carroll W. 
Doten. 

"The distinction between nominal wages and real wages 
is well known to economists. For practical purposes it is 
well understood by those who work for wages and salar- 
ies. I have often heard it remarked that while wages had 
perhaps risen to some extent prices had advanced more 
rapidly still, thus leaving the wage earner poorer than be- 
fore. Except in one or two books I have not seen the ap- 
plication extended to railway rates." — Garrett Droppers. 

"Yes, the distinction between nominal (money) wages 
and real wages has long been recognized. Variations in 

22 



the former do not necessarily imply variations in the lat- 
ter. Real wages have not advanced as fast as money 
wages in the last ten years. In the free silver controversy, 
one of the best arguments addressed to workingmen was 
that however much their money wages might increase in 
the transition to a silver standard prices would advance 
still faster and that real wages would decrease synchron- 
ously with an increase in money wages. Something like 
this, I think, occurred during the greenback era. The 
distinction between nominal and real railway rates, is, I 
think, similar." — C. F. Emerick. 

"(a) Yes. 
"(b) Yes. 
"(c) Yes."— A. B. Fairchild. 

"This question should certainly be answered in the af- 
firmative. The distinction applies to wages, prices and 
railway rates." — Fred R. Fairchild. 

"Yes." — Irving Fisher. 

"There are, undoubtedly, in fact and in practice, dis- 
tinctions between nominal and real wages, prices and rail- 
way rates ; but your circular is somewhat confused as to 
the principle of the distinction. The practically and hu- 
manly important distinctions are between the mere 
amounts of money received in a given time (not for a 
given amount of produce or transportation) by laborers 
and by manufacturing and railway capital and the general 
purchasing power of the money or nominal wages, prices 
or rates. Real wages depend upon the purchasing power of 
the money earned by the laborer and not upon the part of 
the value of the product paid to the laborer. Real railway 
rates are not to be ascertained by noting what part of the 
values of the goods transported must be paid for transpor- 

23 



tation. The important point to note in wages is how- 
much the laborer earns in a day or year, not how much 
he gets per unit of output; and the important thing to 
note in transportation is how much the railway earns, not 
how much it charges for carrying a ton or a bushel." — 
Willard C. Fisher. 

"Yes — to all three." — J. D. Forrest. 

"Yes, without a doubt. 

"Yes. 

"Yes." — A. G. Frandenburgh. 

"Yes." — George P. Garrison. 

"(a) Yes. 
"(b) Yes. 

"(c) Yes, though I should not accept Dr. Merritt's de- 
finition of real rates as adequate." — David I. Green. 

"There are doubtless such distinctions. In case of rail- 
way rates, however, the distinction might be called sec- 
ondary, i. e., it does not have to do directly with satisfac- 
tion or psychic income or consumers as is the case with 
laborers. Railway stockholders can hardly realize de- 
creased 'real railway rates' until, as consumers, they run 
up against decrease, for instance, while a contemporaneous 
decrease in 'real prices,' or increase in real wages, might 
offset such a decrease." — Lewis H. Haney. 

"Yes, to all three divisions of this question." — W. O. 
Hart. 

"Yes, disregarding economic friction and monopoly in- 
fluences; real wages, commodity prices, and service rates 
tend to remain proportional; and nominal wages, prices 

24 



and rates, being functions of the former should also re- 
main proportional." — R. H. Hess. 

"Yes." — Joseph French Johnson. 

"There are. The value of a dollar in the United States 
is practically the same thing as the purchasing power of 
23 22-100 grains of pure gold, because that many grains 
of pure gold can readily be converted into a dollar. Al- 
terations in the supply of gold relative to the demand re- 
sult in alterations in the general price and wage levels. 
A man's wages are to be measured not by the number of 
dollars he receives, but by the purchasing power of those 
dollars." — E. W. Kem merer. 

"There is a distinction between nominal wages and real 
wages, nominal prices and real prices, nominal railway 
rates and real railway rates. Nominal wages, prices and 
rates are the money rate ; real wages, prices and rates are 
the goods or means of satisfaction which the money will 
buy." — David Kinley. 

"Yes, unquestionably." — M. A. Kursheedt. 

"(a) Yes. 
"(b) Yes. 
"(c) Yes." — Charles H. Leeds. 

"There can be no question to my mind but that there 
are real and vital distinctions between nominal and real 
wages, prices and rates. I think, however, that for all 
practical purposes we may assume that the relation be- 
tween nominal and real in each case is about the same." 
— W. H. Lough, Jr. 

"Of course the purchasing power of wages is different 

25 



from the nominal rate or price of labor as was clear dur- 
ing the Civil War." — Arthur T. Lyman. 

"There are, to be sure. A dollar is worth no more than 
it will buy in goods and services." — Roswell C. McCrea. 

"Yes, in all cases ; but in judging real and nominal rail- 
way rates changes in interest rates should also be consid- 
ered for the cost of operating a railway includes fixed 
charges on its debt as much as labor and material." — 
John Martin. 

"Yes."— Royal Meeker. 

"Yes, certainly. The distinction between the apparent 
and the actual is of fundamental significance in the care- 
ful and thorough investigation of all subjects whatso- 
ever. The great world, hasty and superficial, commonly 
rests content with the apparent." — Charles W. Mixter. 

"There is no distinction made between nominal and 
real wages, prices or railroad rates, nor can there be any 
distinction unless some past or future standard is set up 
with which to compare present rates. Even with this 
comparison before us, inasmuch as these rates are ex- 
pressed in terms of money, the question resolves itself into 
a determination of whether or not the purchasing power 
of the dollar has increased or decreased. Wages, prices, 
railroad rates, and other things are subject to change ac- 
cording to conditions and these rates are real to-day and 
nominal as compared with yesterday or a year ago." — 
James B. Morman. 

"(a) There is in fact and actual practice a nominal 
wage and a real wage. In some classes of employment a 
high nominal wage does not necessarily mean a high real 

26 



wage. It is not uncommon to find corporations raise or 
lower the nominal wages of some of their employees ac- 
cording as they are employed at headquarters (without ex- 
penses) or on the road (with expenses). To the extent 
that many railroad employees are subject (from the gen- 
eral uncertainty of where their presence is required) to 
more expense than an ordinary clerk or salesman, their 
nominal wages might be expected to be a little higher. 
Adequate details on this distinction may, if desired, be 
found in 'Marshall's Principles, London, 1890, page 576, 
et seq. } 

"(b) There is also in fact and practice a distinction be- 
tween a nominal price and a real price. An increase in 
the supply of gold (a depreciated dollar) may be offset by 
a decrease in a marginal utility of the goods offered for 
sale, in which case, we would expect no change in the pre- 
vious price. 

"(c) The distinction between nominal railway rates and 
real railway rates referred to in the quotation from Dr. 
Merritt's essay, is confusing. Dr. Merritt's statement 
'while real rates consist of a percentage of the value of 
the commodities transported' (italics mine) is different 
from his implication that 'real rates are the amount of 
labor and materials which the money received for trans- 
portation will buy.' American railways are primarily 
concerned in the transportation of goods and not values in 
the fixing of rates apart from the complementary question 
of the inclusion of insurance. Cost of transportation 
varies directly, or nearly so, with the material character 
of the goods, and as value depends on utility or cost of 
production, which has no relation to such material charac- 
ter, there is no relation between the cost of transportation 
and the value. For example, a rate based on the cost of 
transporting a ton of coal would not materially differ from 
one based on the cost of transporting a ton of copper ; but 
if the rates were based on the values of the respective 

27 



commodities then indeed a great difference would appear. 
For this reason I can only accept the existence of real rail- 
way rates as 'the goods purchasable with the nominal 
(money) rates.' " — George S. Moynahan. 

"(a) There is such a distinction in the case of wages 
and it is fully recognized by most economists. 

"(b) There is no such distinction in the case of prices 
for it is excluded by the definition of price as the relation 
between the value of a commodity and that of the unit 
of standard money. Price is the nominal cost of a com- 
modity to a purchaser, real cost may be quite different. 

"(c) As I have long urged, there is a distinction in the 
case of railway rates that is fully equivalent to that in the 
case of wages. Dr. Merritt recognizes the basic principle 
but fails to apply it logically. 

"As to all the distinctions suggested in your inquiry, it 
is clear that there are two points of view from which real 
wages, real cost or real railway rates may be considered. 
In the case of wages, the term 'real wages' has, through 
the usage of economists, come to mean the purchasing 
power of the wages received when expended to supply the 
wants of the wage earner. Thus the study of real wages 
has been inseparable from the study of the budget of 
typical wage earners. Wages might have been consid- 
ered, on the other hand, from the point of view of the em- 
ployers, and in that case, the term 'real wages' might have 
come to mean the cost in the articles produced by the em- 
ployer, of the labor of the wage earner. This is not pre- 
cisely the thing intended by 'wages in kind' and a term 
which would express it might still be useful. 

"As the term 'real railway rates' has acquired no defi- 
nite meaning, and it can plainly be used either from the 
point of view of the purchaser or that of the seller of 
railway transportation, it is necessary when using it, to in- 
dicate which is meant. Real railway rates, from the point 

28 



of view of the traveller or shipper, must mean an expres- 
sion of rates in terms of labor performed or the commodi- 
ties produced in order to obtain the money to pay the 
nominal railway rates; — from the point of view of the 
carrier, however, the correct conception of real railway 
rates requires their expression in terms of the purchas- 
ing power of the nominal rates when expended for the 
ordinary requirements of railway corporations, that is, for 
labor, equipment, fuel or other materials and supplies, 
and as recompense for the use of capital invested in rail- 
ways." — H. T. Newcomb. 

"The terms 'nominal and real zvages* are very gener- 
ally recognized, being based on the standard of living se- 
cured by a given service of labor; the terms 'nominal and 
real price and rates' have no such basis, since the stan- 
dard of living of those who sell goods and those who 
charge railroad rates depends not on prices and rates, but 
on profits, i. e., on the degree to which they can reduce 
their cost below the price or rates in the market." — L. W. 
Parish. 

"Yes, most decidedly so." — Julius H. Parmelee. 

"There are certainly such distinctions between nominal 
and real wages, prices and railway rates as indicated in 
your letter of inquiry. This fact is universally recognized 
by the economist. As far as I know there is no econo- 
mist who opposes the idea. The fact is recognized by the 
business man and the laborer, as well as by the economist, 
in actual practice, consciously or unconsciously." — War- 
ren M. Persons. 

"Most certainly."— Carl C. Plehn. 

"There are, of course, and while often very difficult to 

29 



determine they must always form the basis of our calcula- 
tions." — Jesse E. Pope. 

"Beyond question there are. No truth is better recog- 
nized." — H. H. Powers. 

"Yes."— L. G. Powers. 

"Money is a fluctuating standard, and a comparison of 
wages, prices and rates for any year with any other year, 
to be accurate, must take into account this fluctuation in 
money value." — Lawson Purdy. 

"Comparing the values of commodities purchased at 
different times for purposes of consumption as the stan- 
dard there is no doubt a difference between real and 
nominal money wages." — H. W. Quaint ance. 

"Yes, and clear distinction must always be made be- 
tween nominal wages and real wages, nominal prices and 
real prices, nominal railway rates and real railway rates." 
— Charles Lee Raper. 

"(a) There are undoubtedly such distinctions in fact; 
and even unschooled labor employees and comparatively 
unread laborers have to my knowledge adjusted differ- 
ences under the mutually-accepted axiom that 'money is 
not worth as much in trade now as it was a few years 
ago/ 

"(b) The same as (a). 

"(c) Yes; even the land buyer in a new region calcu- 
lates how much less a percentage of the Chicago price for 
grain and cattle will be left to him in case he keeps his old 
farm in Illinois." — Walter T. Ray. 

"Decidedly 'yes.' The very fact that while nominal 

30 



railway rates have increased and real railway rates have 
decreased proves that a very important distinction exists." 
Gardner Richardson. 

"Assuredly such distinctions exist, but it is very diffi- 
cult to trace accurately the curves of divergence between 
the nominal and the real scales, or to ascertain the dis- 
tance between them at any time for a generic group of 
prices." — Philip A. Robinson. 

"(a) Yes. 

"(b) 'Real prices' seems to me a misname but this is a 
matter of definition. Certainly gold prices have risen, 
while the ratios of exchange among commodities gener- 
ally have changed but little. 

"(c) I do not like this nomenclature either, but agree 
as to the reality of the distinction it refers to." — Henry 
R. Seager. 

"I believe that the distinction between real and nominal 
wages and real and nominal value is a valid one." — J. 
Allen Smith. 

"(a) Yes. 

"(b) No. 

"(c) Yes, if we agree to understand by nominal wages, 
prices and rates those expressed in terms of money, and 
by real wages, prices and rates those expressed in terms 
of all other commodities. It does not, however, neces- 
sarily follow that because there has been a general rise in 
prices that the intrinsic value of gold has depreciated. I 
do not believe in the quantity theory of money. While 
willing to admit that a sudden increase in the produc- 
tion of gold is apt to affect its purchasing power in terms 
of other commodities, I do not think that this can go on 
for any length of time, unless there is also a change in the 

31 



cost of production of the gold metal. The fact that 
prices of different commodities have not advanced to the 
same extent and that articles controlled by trusts or en- 
joying a natural monopoly have risen most in price, while 
prices of competitive articles have either not risen at all 
or greatly lagged behind, points to the presence of other 
causes than the depreciation of the intrinsic value of gold 
in this movement." — N. I. Stone. 

"(a) Yes. 
"(b) Yes. 
"(c) Yes." — George S. Sumner. 

"Yes." — Frank J. Symmes. 

"(a) Unquestionably we must recognize a distinction 
between nominal and real wages. For instance, salaried 
men, receiving the same, or even twenty per cent, more 
salary, than in 1897, are finding that they can no longer 
command the same standard of living to-day as enjoyed 
ten years ago. 

"I feel too little informed on the immensely complex 
question of railroad rates to venture an opinion of any 
value." — J. A. Tillinghast. 

"There is a valid distinction between the value of a 
commodity or service expressed in terms of money, and 
its value expressed in terms of other commodities and ser- 
vices. That distinction is as legitimate when applied to 
the value of railway services as when applied to the 
value of personal services. But use of the terms 'nominal' 
and 'real' in connection with price or rates involves con- 
fusion — or, at any rate, necessitates agreement upon defi- 
nitions. If by price is meant value in terms of money (a 
common useful definition) there can be no distinction be- 
tween 'nominal' and 'real' price. If by rates is meant 

32 



published and unpublished charges for railway service, in 
terms of money, there is no such thing as 'real' rates as 
contrasted with 'nominal' rates. But if by price and rates 
we mean merely ratios of exchange in terms of anything 
and everything, then it is important to distinguish between 
money rates and other rates. But why one should be con- 
sidered any more 'real' than another is a question. 

"Without attempting to settle the question, here, as to 
which of the above definitions should be employed, there 
is, in any case, no necessary connection or correspondence, 
in theory, between the above distinction regarding (so- 
called) 'nominal' and 'real' wages and 'nominal' and 'real' 
rates as defined in the accompanying quotations from 
President Hadley and Dr. Merritt. 'Real rates' are there 
defined as 'a percentage of the value of commodities car- 
ried.' I do not know that 'real wages' have ever been de- 
fined as a 'percentage of the value' of the particular ser- 
vices rendered. It is, therefore, not conducive to clear- 
ness, to group the terms 'wages', 'interest' and 'rates' and 
apply to them all alike the terms 'nominal' and 'real,' when 
the latter have different meanings according as they are 
applied to one or another of the former terms.' " — E'dson 
Newton Tuckey. 

"Yes."— E. B. Waller. 

"Yes, in all three cases (for first two see my Funda- 
mental Problem in Monetary Science, pp. 291-4, and my 
Measurement of General Exchange Value, pp. 465-8), 
where, however instead of 'real price' I use 'true price.' " 
C. M. Walsh. 

"Substantially yes. Nominal wages are wages in 
money ; real wages consist of what money wages will buy 
or exchange for. Price and value are not equivalent terms 
and should not be confounded, one with the other. Price 

33 



is the value of a thing in money. A rise in prices is the 
same thing as a fall in the value — purchasing power — of 
money, hence, if no more money of less purchasing power 
be given as wages, then real wages are reduced. 

"Nominal railway rates are, of course, rates in money. 
Real rates are what the money rates will buy of labor, 
supplies and material required for operating and main- 
taining roadway and equipment. If money of reduced 
value, or purchasing power, is paid to railroads as railway 
rates, it becomes equivalent to a reduction of rates." — A. 
J. Warner. 

"I think not. They are juggling with words." — D. C. 
Westen haver. 

"No, but there are fluctuations in the prices of com- 
modities both general and special. I think there has been 
an increase in general prices since 1897, due to the large 
output of gold and that there is now a reaction and de- 
cline, due to the panic and crisis of 1907. I think that 
this reaction will soon pass away and that prices will re- 
cover and resume the progressive increase above noted, 
for the reason mentioned." — Horace White. 

"I do not weigh the following words carelessly, as I 
have long been interested in the line of inquiry you are 
starting. And I want to commend your course, which 
seems not only prudent but also very auspicious as an 
omen of things to come. 

"I believe there are such distinctions as are here noted, 
and that recognition of them is absolutely necessary to 
correct thinking and correct conclusions in many fields of 
economic study. 

"However, I do not think that 'nominal' and 'real' are 
well chosen words to describe the distinction in rates be- 
cause the distinction differs from that in the other two 

34 




cases, where the words have long had a settled meaning. 
In other words, I think that there is a distinction in (a), 
(b) and (c), but that it leads to error to define the dis- 
tinction in case (c) by the same terms as in (a) and (b)." 
— George Ray Wicker. 

"There is a real distinction between real and nominal 
wages, real wages being the sum of goods and services re- 
ceived for services rendered. 

"(b) No distinction. Prices are values expressed in 
terms of the monetary unit : any other expression of value 
is not a price. 

"(c) 'Real rates' as used by Merritt and Newcomb are 
not analogous to real wages. One is return for services, 
the so-called real rates are a return or measure of the ser- 
vices, a part of cost or production to the shipper. This 
means nothing to the carrier. His outlay is in terms of 
money and his receipts can only be considered in the same 
terms." — M. S. Wildman. 

"I do not believe there is in actual practice any very 
clear distinction between the two. It exists in the mind 
only of imaginative statisticians." — A. B. Woodford. 

"Most certainly." — Lester W. Zartman. 



35 



ANSWERS TO THE SECOND QUESTION.* 

"For reasons stated under i, I do not think your ques- 
tions have much significance. Granting that this general 
method of approach is valuable, it still remains true: (a) 
that 1897 is a bad year from which to begin the compari- 
son; and (b) that the problem is indefinitely complicated 
by the changing volume of business. Rates might theor- 
etically decline while prices of labor and supplies increase, 
and yet pay higher dividends to the holders of railway 
stocks." — T. S. Adams. 

"The distinction is important from the point of view of 
distribution of income. To the extent that the charges 
that a railway has to meet are fixed sums or percentages 
the distinction is not important but to the extent that the 
charges are variable — fluctuating with market conditions 
— the distinction is of tremendous importance." — Eugene 
E. Agger. 

"It is important. Under a depreciated currency the 
nominal revenue might be sufficiently above the nominal 
expenses in any business to pay the interest on the capital 
involved, provided that interest could be paid in the same 
depreciated currency. But the surplus that would be left 
over for improvements or extensions would not add to the 
real value of the property an amount equal to what it 
would have been had the currency been on a sound basis. 
This assumes of course that the original capital investment 
was made on the basis of sound currency although, if not, 



*The second question was: "If there is such a distinction; is 
it important and what is the extent of its importance?" 

36 



there would still be a difference between the nominal 
value and the real value of the surplus." — W. F. Allen. 

"It is important, making a difference of from twenty 
to thirty per cent." — E. Benjamin Andrews. 

"No significant, relative estimate of two or more eco- 
nomic situations can be made without reckoning with this 
distinction; e. g., wages in Europe and in the United 
States, or railway rates in India and England." — C. C. 
Arbuthnot. 

"After many years of thought I have come to regard 
the pay of the unskilled laborer as on the whole the best 
individual measure of purchasing power, but the index 
numbers are important. I consider it so important that I 
am limiting my stock-market investments to depreciated 
bonds and stocks having large and long-time bond issues 
ahead, so as to reap the advantage of payment in a depre- 
ciating medium." — N. T. Bacon. 

"Wages can be conceived in three phases. First, they 
are the product of labor ; second, they are the money ob- 
tained for the product of labor; and third, they are the 
goods obtained for the money that was obtained for the 
product of labor. If competition were free, these three 
quantities would, as a rule, be precise equivalents." — 
Hugo Bilgram. 

"The above relations indicate that any comparison 
should not be made on the basis of relative rates or prices, 
but that they should be made on some basis to show what 
is the relative share of the various producers in the pro- 
duct of which the rate or price is the measure of amount." 
— John Balch Blood. 

37 



"This is an important distinction. Considered in con- 
nection with what economists call 'increasing returns' 
(i. e., growth of traffic with no corresponding growth of 
investment in labor, material, etc. ) it is a distinction of in- 
stant, immediate, and overwhelming importance." — 
James E. Boyle. 

"Yes, it is of vital importance. The same laws which 
govern ordinary wages also govern railway rates and the 
railroad corporations, in my judgment, have the same 
right to a consideration of real rates as the wage earner 
has to a consideration of real wages." — John E. Brind- 

LEY. 

"The distinction is highly important in the study of cer- 
tain questions. Advance in money wages since 1897 have 
not meant equivalent increases in real wages. By a par- 
ity of reasoning, the same thing is true of nominal in- 
creases in railway rates. President Hadley's statement 
quoted in your letter is undoubtedly correct." — Charles 
J. Bullock. 

"The distinction must be observed for an accurate 
comparison of rates at different periods or in different 
countries." — Victor S. Clark. 

"I think it is important. Such distinctions are neces- 
sary to correctly compare different countries with each 
other and conditions in the same country at different 
times. It has bearing in the tariff question, for real wages 
and prices, not nominal ones, are significant. By neg- 
lecting the distinction great injustice may be done salaried 
people like teachers and the railroad may suffer by a mis- 
informed or ignorant public opinion in these matters. 
For the speculative world to ignore it may be fatal not 
only to them but the general public as well." — J. W. 
Crook. 

38 



"Its importance is measured by the degree of difference 
in the purchasing power of money at different periods as 
compared with commodities, being greatest when prices 
are most highly inflated." — John Franklin Crowell. 

"Very important in all transactions between debtors 
and creditors and where rates of payment for goods or 
services remain unchanged on account of law, custom, or 
any other reason whatever." — F. R. Clow. 

"It is claimed that real rates have declined twenty-five 
per cent in less than ten years. If so, conditions have 
accommodated themselves to this, so that the gain is dis- 
tributed. To increase the rate, upon the theory that the 
decrease has been too great, will involve the difficulties 
growing out of the impossibility of tracing the application 
of the real rate to various commodities and articles, that 
now form the basis of commodities and classes in freight 
tariffs. An error in distributing the increased charge for 
transportation may affect most disastrously whole com- 
munities and sections of territory. A slight rise in freight 
rates would put brick manufacturers in some localities 
out of business. Manufacturers of fertilizers would be 
similarly affected. So would furniture manufacturers." 
— Morris M. Cohn. 

"The distinction is very important. Real wages, prices 
and rates being the important things to determine. This 
can only be done by a careful statistical inquiry, as real 
wages are in relation to the average general purchasing 
power of a dollar, and just so real prices and real railway 
rates are relative to what the recipient can do with the 
sum charged, whether in renewing his supply of goods or 
in maintaining the railway and its equipment and earning 
a fair degree of profit for the stockholders." — F. S. Crum. 

39 



"It becomes important in proportion as the real rate 
varies from the nominal rate. Where the real rate varies 
considerably from the nominal, the real rate alone should 
be used." — John Cummings. 

"You give too much space for question No. i and too 
little for No. 2. As to (a) it is true that to the worker 
an advance in real wages — in the command over the lux- 
uries, conveniences and necessities of life — is more im- 
portant than an increase in money receipts, (b) The ex- 
tent of its importance is determined by the degree in which 
relative prices have advanced, stood still, or receded, so 
far as the respective sellers are concerned, (c) The ex- 
tent to which sellers of transportation have been affected 
as compared with the sellers of other commodities (in- 
cluding labor) must be determined, all other things being 
equal, by the relative decline in the receipts of the respec- 
tive parties. Of course, a long statistical investigation is 
necessary to determine the degree in which various parties 
have been affected." — W. M. Daniels. 

"No one questions the fact that you are trying to bring 
out, but it is misleading to make use of the terms real 
and nominal in this way. It creates a presumption in the 
mind of the casual reader that an injustice is being prac- 
ticed upon the railroads and that they ought without ques- 
tion to be allowed to charge rates at the present time that 
are as much higher than their former rates as the prices 
of goods are above the prices prevailing at a previous 
period." — Carroll W. Doten. 

"The distinction is important, but I do not quite see how 
it could be applied in a general way to all charges, salaries 
and rates. If it were applied to the regulation of railway 
rates, why not to taxes, salaries, debts (bonds, mortgages, 
debentures, insurance policies, etc.). The distinction 

40 



might be applied more logically to securing a stable stan- 
dard of value. This application has been suggested by cer- 
tain economists who have studied the question of a scien- 
tific money standard." — Garrett Droppers. 

"All persons and concerns with fixed money incomes 
are adversely affected by a rise in prices, whereas all who 
participate in advancing prices and have fixed sums in 
money to pay are the gainers. The gains of one party 
represent the losses of the other. Price changes, due to 
changes in the production of gold, introduce a disturbing 
influence upon business affairs for the reason that they 
do not occur simultaneously at all points. If fluctuations 
in the purchasing power of gold registered themselves in 
the case of each commodity at one and the same time 
with perfect nicety, they would be left out of the account. 
Such, however, is not the case. In so far as price changes 
are anticipated as by a rise in the rate of interest if 
prices are rising, they do not disturb business affairs." — 
C. F. Emerick. 

"So far as railway rates affect the cost of living the 
distinction is important. The rate on flour affects the real 
price of flour." — A. B. Fairchild. 

"This distinction is certainly important, indeed fun- 
damental. The thing of real importance to those who are 
interested in wages, prices, railway rates, etc., is the real 
price. The nominal or money price is more or less a mat- 
ter of accident, depending on the thing used as a stan- 
dard of value. For example, if the standard dollar in the 
United States, which is to-day composed of 23.22 grains 
of pure gold, had been originally fixed at forty-six grains, 
the general level of money prices would be practically 
fifty per cent lower than it is to-day, since the standard 
would be worth twice as much. Real prices, wages, etc., 

41 



and the welfare and relative wealth of the people would 
be no different from what they are to-day. The funda- 
mental thing then is the real price or wage rather than the 
nominal or money price or wage." — Fred R. Fairchild. 

"Yes." — Irving Fisher. 

"The distinction, as drawn in the answer above, is very 
important. The mere amount of money received by la- 
borer, capitalist, or any other person signifies nothing as 
to the conditions of life for the person in view. But the 
amount of the goods and services which the money will 
purchase signifies everything. This is the big fact, that 
is the theory. In actual life, of course, we come soon to 
carry in mind what any money income will command of 
good things; and then the distinction between real and 
nominal income is of practical importance only as the pur- 
chasing power of money changes." — Willard C. Fisher. 

"Important — indicating material decrease in real fixed 
incomes, whether of railroad, capitalist, or salaried man." 
— J. D. Forrest. 

"There can be no question of its importance. Profit 
and loss often rest upon it. Salaries of professors in 
American colleges are nominally the same as in 1897, but 
actually they are now less than ten years ago. Of course 
the same would apply to railroad rates." — A. G. Fraden- 

BURGH. 

"It is so important that no reliable conclusion as to 
what are fair rates to be charged by public service cor- 
porations can be reached without considering it. But, 
as a matter of fact, if the railroads had themselves always 
been careful to observe this distinction and had not, by 
watering their stocks, confused the effort to determine 

42 



fair rates, they would be far more consistent in emphasiz- 
ing the distinction now." — George P. Garrison. 

"The distinction is of importance." — David I. Green. 

"In discussing its importance the distinction between 
average receipts per ton mile and net earnings must be re- 
membered; also the public character of the railway ser- 
vice. Change in character or volume of traffic may change 
average receipts without affecting net earnings. So, 
also with changes in operating efficiency. 

"I understand you to mean by 'real rates' practically the 
average net receipt per ton mile. It is certainly impor- 
tant to distinguish this from and compare it with the gross 
figure. But in the questions now at issue it is chiefly im- 
portant as a factor in determining net income from opera- 
tion and the rate of return on private capital in transpor- 
tation." — Lewis H. Haney. 

"The distinction is important, but it is hard to describe 
the extent of the importance. In some sections of the 
country it is of course greater than others; for instance, 
in this city the fuel problem is not of the great import- 
ance it is where the winters are more severe. There are 
comparatively few days in this city in winter when arti- 
ficial heat is required during the entire day, and the char- 
acter of clothing necessary for comfort is of course not as 
expensive as where the cold is more intense and extended, 
and certain articles of food, by reason of our open win- 
ters, are of course not as high as they are in the North." 
— W. O. Hart. 

"Such a distinction is fundamental in comparison of 
wages, etc., among different groups of recipients and at 
different periods of time. With regard to the problem in 
hand, it justifies the maintenance of a constant propor- 

43 



tion between railway charges and the cost of service as 
measured by wages and prices paid (under economic ad- 
ministration) including interest at a reasonable rate upon 
an honest capitalization." — R. H. Hess. 

"It is important. The forces bringing about the rise 
of prices will necessarily lead to a rise of railroad rates — 
or to railroad bankruptcy." — Joseph French Johnson. 

"It is of the utmost importance, because of the vary- 
ing extent and degree of promptness in which alterations 
in the relative money supply affect (i) general prices, 
(2) general wages, (3) the prices of different individual 
commodities (which together constitute the general price 
level), (4) the wages of different classes of working men 
which together constitute the general wage level." — E. 
W. Kem merer. 

"The distinction is important; for the welfare of the 
individual or class is determined by his real wealth and 
income, not his nominal wealth and income. The work- 
ing man who owns a $400 cottage (cost of building), is 
no richer because the assessor values it for taxation at 
$500 if he cannot sell it for more than $400. He has no 
more to eat when his supplies consist of a barrel of flour 
and a bushel of potatoes and twenty pounds of beef, when 
he has to pay $15 for these supplies, than he is when he 
gets them for $10. The real standard of living or con- 
sumption, in other words, consists in the goods actually 
used, and not in the money they cost, which indicates the 
individual's proportion of the community's goods." — 
David Kinley. 

"The distinction is important, but to what extent it is 
important, I am unable to state without a very careful 
study of the subject." — M. A. Kursheedt. 

44 



"The distinction is very important. A variation in the 
nominal rate may not alter the economic welfare of any 
person, but any change in the real rate points with cer- 
tainty to somebody's rise in the world and someone else's 
setback." — Charles H-. Leeds. 

"Certainly; and its extent will depend on the purchas- 
ing power." — Arthur T. Lyman. 

"The distinction is of particular importance in the in- 
terpretation of price movements. The rise in prices since 
1897, for instance, has been 'nominal' rather than 'real,' 
i. e. y money, as the measure of value, has increased in 
volume more rapidly than have those commodities and 
services the values of which it serves to measure." — Ros- 

WELL C. McCREA. 

"The distinction is important in a period like the pres- 
ent, when the supply of gold is changing rapidly, though 
the fall of prices, since the panic of October, 1907, indi- 
cates that other conditions may seriously retard and even 
overcome the rise of prices which normally accompanies 
an increased output of gold." — John Martin. 

"It is important. It does not follow, however, that, 
because the gold dollar has depreciated, railway rates 
should be boosted up." — Royal Meeker. 

"It is of the first order of importance. If real railroad 
rates continue in the future progressively to decline 
(which must be the case if there is continued divergence 
between the prices of what they buy and the prices of 
what they sell) it will first check improvements and ulti- 
mately bankrupt the roads. The position of any one who 
sells for a customary price is very difficult under present 
monetary conditions, unless he can virtually advance his 

45 



price by lowering the quality and hence the cost of his 
commodity. We are really at present in a revolutionary 
economic state, and the public mind has great difficulty in 
getting its bearings through inexperience. This is but the 
third time, since modern history began, when there has 
been inflation on a specie basis." — Charles W. Mixter. 

"The only importance, in my opinion of this distinction 
lies in the fact that with comparative statistical data be- 
fore us of the three rates mentioned above, we are able to 
determine the relative increase or decrease of these rates 
individually from year to year and comparatively with 
each other. The figures then speak for themselves, as to 
real increase or decrease of wages, prices and railroad 
rates, and their nominal increase or decrease relatively to 
each other." — James B. Morman. 

"This distinction as to the difference between the nomi- 
nal and real railway rate is of considerable importance to 
the railways, since the value of railway services are, like 
the value of anything else, determined by marginal utility 
and not by cost. Increase in the cost of labor and ma- 
terials (a decrease in real rates) does not necessarily 
imply an increase in the value of the transportation ser- 
vices rendered, and therefore the railways have little 
economic force at their command in an attempt to raise 
nominal rates as long as low real rates is all they can 
plead as an excuse. If, however, a low real rate is ac- 
companied by an increase in the value of services (higher 
marginal utility) the moral force of the former will add 
itself to the economic force of the latter. Without the 
economic force of efficiency of service rendered for nomi- 
nal rates a low real rate is to be economically interpreted 
as the rate of a 'marginal producer.' If competition ex- 
ists there is no help at hand, but if not, as in the case of 
most railways, then the existence of an industry as well 

46 



as that of the producer is threatened and the 'principle of 
protection' becomes justifiable; that is, governmental in- 
terference where the free play of economic law fails to 
'regulate.' This of course would be the provision of 
means to enable a railway to raise its nominal rate. Some 
foreign railways are obliged to charge a nominal rate per- 
mitting of so low a real rate that expenses eat up all in- 
come, and are therefore supported by government aid 
(principle of protection) on account of the high social 
(uncollectible) income accruing to the country in gen- 
eral. A study of the questions involved in real railway 
rates would to my mind help in pointing out why railways 
do not profit from 'rents' while landlords do." — George 
S. Moynahan. 

"As money is not in itself an ultimate economic good, 
but merely the medium by which surplus commodities are 
commonly exchanged for those necessary to satisfy eco- 
nomic wants, the distinctions between returns for labor 
services or the use of property expressed in mere volume 
of money and such returns expressed in the capacity of 
the sums of money obtained, to serve, as to the individuals 
receiving them, the purposes for which money exists are 
always important. They are so important that any in- 
quiry as to wages, costs, or railway rates, 
which seeks to compare conditions at different peri- 
ods of time or in different regions and omits to take them 
into account is scientifically incomplete and is usually 
rendered valueless by the omission." — H. T. Newcomb. 

"The distinction as applied in your queries is, as it 
seems to me, a misleading one. Rates are the prices 
charged to a unit (of weight and distance) of transporta- 
tion. The fallacy of your position lies in ignoring the 
distinction between Weal and nominal cost of transporta- 

47 



Hon/ The proper term analogous to 'real and nominal 
wages' is 'real and nominal profits/ 

"There is no reason why rates should bear a constant 
ratio to price. Rates of transportation have had a con- 
stantly decreasing ratio to prices ever since the time of 
the Stuarts, when it cost more to transport goods from 
York to London than it does now to transport them from 
Minnesota to London. This fact is a great advantage to 
consumers and it is consistent with larger profits than in 
former years." — L. W. Parish. 

"If society were static, the importance would be nil; 
for relative conditions would adjust themselves (i. e., if 
money fell, wages and prices would go up, and vice versa) . 
But in shifting conditions, as to-day, the importance is 
considerable. Prices feel the influence of cheap money 
first, then wages, and finally such rates as railroad rates, 
which are subject to judicial procedure, and are there- 
fore slow of adjustment." — Julius H. Parmelee. 

"The distinction is decidedly important and any fail- 
ure to recognize it could not long continue as price 
change, resulting from the economic forces operating, 
must thrust it upon the attention of everyone, producer 
and consumer. The extent of its importance is measured 
by the difference between economic justice and injustice 
between the various classes of producers and consumers, 
capitalists, wage-earners and entrepreneurs." — Warren 
M. Persons. 

"Yes. The underlying meaning of all contracts to pay 
money changes when the purchasing power of money 
changes." — Carl C. Plehn. 

"Failure to take into account this distinction may bank- 
rupt a road, stop dividends and thus cause financial dis- 

4 8 



turbance ; or, in case dividends are continued, needed im- 
provements or extensions may be stopped. We need im- 
provements and we need extensions. These it seems to 
me outweigh the disadvantage of a slight increase in 
nominal rates. There is bound to be a disadvantage for 
the general public do not easily grasp the importance of 
the above distinction and as a consequence prejudice is 
sure to be the outcome of any upward movement of rates, 
even though this movement is more apparent than real." 
— Jesse E. Pope. 

"Its importance is sufficiently indicated by the percent- 
ages quoted within." — H. H. Powers. 

"It is very important." — L. G. Powers. 

"There is such a distinction ; it is important, and its im- 
portance is measured by the extent of the fluctuation in 
the value of money." — Lawson Purdy. 

"This distinction is important but of no greater im- 
portance and no greater extent than in the case of prices 
for commodities to any person whose income is compara- 
tively fixed. If the railways do not care to do a service 
longer at a given price, it is their privilege to stop just the 
same as any day laborer may stop. To say that the pub- 
lic nature of the railway business will not permit of a stop 
is only to play fast and loose by one word for the public 
and two for the companies." — H. W. Quaintance. 

"The real wages, prices and rates are the important 
things. Upon them, not upon nominal wages, prices and 
rates, depend the prosperity and progress of the people." 
— Charles Lee Raper. 

"The distinction is important. Coryea Moylan Walsh, 
in his splendid book entitled 'The Measurement of Gen- 

49 



eral Exchange Value' ventures the suggestion that gold 
may be found among the most variable priced commodi- 
ties. 

- "Every studious speculator in farms, bonds or stocks, 
reasons vaguely that what he wants back in a few years 
is a lump purchasing power, and so he attempts to make 
such investments as will bring an 'unearned increment' 
either because of or in spite of changes in the exchange- 
value of gold." — Walter T. Ray. 

"The distinction is important for the absolute money 
charge is of little value or interest to the shipper compared 
to the relative. Naturally an adoption of a real rate on a 
basis of charges of ten years ago would work to the dis- 
advantage of the shipper and to the advantage of the rail- 
road." — Gardner Richardson. 

"The distinction is so far-reaching that it is of the larg- 
est public and private import. A measure of its import- 
ance is the difficulty of adjusting nominal rates ; hence it is 
of the gravest importance for certain selected classes, eco- 
nomic groups. These include wage-earners in most lines 
and localities, and the producers of some lines of com- 
modities." — Philip A. Robinson. 

"As to (c) : Its importance is that it calls attention to 
the necessary relation between the charges for the services 
which the railways render as a whole and the cost of 
rendering those services. Costs have no doubt risen ma- 
terially during the last ten years — disregarding the down- 
ward trend of prices during the last nine months which 
will probably prove temporary only — and this must be 
considered when the railroads are criticised for not lower- 
ing their 'nominal' rates or even for advancing them." — 
Henry R. Seager. 

50 






"All or at least most business arrangements are entered 
into on the assumption that the purchasing power of the 
dollar is constant. Any considerable increase or decrease 
in the value of money seriously disturbs business by al- 
tering the distribution of the social income. Unless all 
contracts involving the payment of money are modified, 
as contemplated in the so-called tabular standard of value, 
an increase or decrease in the purchasing power of money 
alters distributions. Some classes or interests get more 
and others less than would have been the case had the 
value of money — its purchasing power — remained con- 
stant." — J. Allen Smith. 

"I have not sufficient data to express an opinion on the 
subject of railway rates." — N. I. Stone. 

"The importance rests in the fact that the real test of 
the economic condition of a society is not to be found in 
the number of units of a standard of value, such as 
money, which pass through the average person's hand but 
is the amount of the necessities, comforts and luxuries 
of life which the average laborer or rather citizen secures, 
coupled with the amount of savings after the necessities 
and comforts are secured." — George S. Sumner. 

"Yes, very important." — Frank J. Symmes. 

"Certainly it is important. The mere change of twenty- 
five per cent in the purchasing power of each dollar, 
unless compensated by an equal change in the number of 
dollars you get for service rendered is sufficient to cancel 
the profit of any business or to double it, — according to 
the direction of change in purchasing power of the dol- 
lar." J. A. TlLLINGHAST. 

"The distinction between the money values and the 
commodity values of goods and services as explained 

51 



above, is absolutely essential to a correct analysis of any 
problem involving a comparison of wages, prices or rates 
in different periods of time." — Edson Newton Tuckey. 

"Man cannot eat money. He must exchange it for 
commodities. Our monetary system is imperfect. The 
multiple system will be used five hundred years from 



"Yes. (For its importance in the case of prices, see 
my 'Measurement of General Exchange Value/ pp. 473- 

7)- 

"As for railway rates, it means that they ought to rise 
in proportion to the rise of general prices, unless there 
have been improvements and economies reducing the costs 
(in labor and material) of rendering the same services, 
or unless the rates were initially too high." — C. M. 
Walsh. 

"Some two years ago I stated that, since a rise of prices 
was the same thing as the depreciation of money, that if 
prices, on the one hand, continued to rise, thus increasing 
the cost of labor and supplies of all kinds required by rail- 
roads, while, on the other hand, the roads were prohibited 
from earning more dollars by correspondingly raising 
rates, that it was only a question of time when the strong- 
est roads would be forced into bankruptcy. A number 
of the weaker roads have already gone that way." — A. J. 
Warner. 

"Utterly unimportant, if true." — D. C. Westenhaver. 

"I have already answered this question in part. Your 
own questionnaire indicates one of the ways in which such 
distinctions are of importance. Similar distinction in the 
case of wages is important, e. g., in tariff discussions; 

52 



in studies of social progress ; etc. It would take a chapter 
to answer the question adequately." — George Ray 
Wicker. 

"It is important to the shipper that his rate be as low 
as he can make it, just as it is important that his outlay 
for wages or material or any other productive acts be 
low. It is of no import to the carrier as explained above." 
— M. S. Wildman. 

"It is unquestionably, very important in any careful cal- 
culation of actual variations, and relative economic advan- 
tages. Very few people make these, however, with any 
accuracy. Neither business men nor employees make a 
comprehensive and consequently properly proportioned 
comparison." — A. B. Woodford. 

"Of much greater importance than a simple change in 
money or nominal wages and rates. Without making this 
distinction, one's conclusions might be just the reverse of 
the true condition." — Lester W. Zartman. 



53 



ANSWERS TO THE THIRD QUESTION.* 

"The dollar will purchase less than in 1897, unques- 
tionably." — T. S. Adams. 

"A study of the index numbers of wholesale prices for 
the period specified forces one to the conclusion that there 
has been a depreciation in the value of the dollar since 
1897." — Eugene E. Agger. 

"Measured by what standard?" — W. F. Allen. 

"Most certainly." — E. Benjamin Andrews. 

"Without having given the matter careful considera- 
tion, I am inclined to think that gold, as compared with 
many commodities and services, has depreciated in value 
due to the increased output of the metal ; also that many 
commodities and services have appreciated as compared 
with gold, due to the stimulated demand for them in the 
pursuit of profits during the recent period of prosperity." 
— C. C. Arbuthnot. 

"There seems to be no doubt that it has." — N. T. 
Bacon. 

"The value of gold, like that of other things, is change- 
able. A dollar of one year is not the same thing as the 
dollar of another year, except that in each case it is 23.22 
grains of gold. As there is no standard by which to com- 



*The third question was: "Has the American dollar depre- 
ciated since 1897?" 

54 



pare the dollar of one year with that of another year the 
question cannot be answered from an indiscriminate 
standpoint. In relation to some things it has appreciated ; 
in relation to others it has depreciated. 

"It is not fair to compare the conditions of a year of 
stagnation with a prosperous year. When business is 
booming, each workman, as a rule, performs more work 
than when business is dull, and if he gets a larger number 
of dollars per week, he may actually get less in propor- 
tion to the amount of work he is doing. In dull times, 
workmen will always try to make their job last as long as 
possible." — Hugo Bilgram. 

"Depreciation and appreciation are relative and mean 
nothing unless a standard is given. There is no doubt that 
the gold price of certain articles has appreciated since 
1897 in the United States. If these articles are taken as a 
basis, it may be said that money has depreciated. The 
gold price of wages per day has increased in some cases. 
However, the increase in efficiency of labor is such that 
the gold price per unit of work produced has not in- 
creased in all cases. The fact that the differences in gold 
prices of commodities between 1897 and 1907 has been so 
far from uniform would argue that individual apprecia- 
tion of prices and wages was a fact ; and not a general de- 
preciation of the common denominator." — John Balch 
Blood. 

"It undoubtedly has greatly depreciated. The increased 
output of gold proves this." — James E. Boyle. 

"If you mean by this the value of a unit of gold as a 
commodity, an affirmative answer does not necessarily 
follow. It is true that prices in general have risen and in 
some cases very much. But the appreciation or deprecia- 
tion of gold is only one factor — and by no means the most 
important one in this phenomenon." — John E. Brindley. 

55 



"Undoubtedly." — Charles J. Bullock. 

"Measured by other currency, No. Measured by com- 
modity values, Yes." — Victor S. Clark. 

"I think it has. The dollar won't buy as much and as a 
medium of exchange it won't do as much for its owner." 
— J. W. Crook. 

"Taking into account the widening of demand for 
money as concurrent with the enlarged demand for com- 
modities, which brought prices to the level of 1907, it is 
doubtful." — John Franklin Crowell. 

"Yes."— F. R. Clow. 

"I do not think its purchasing or paying quality has 
been uniformly lessened. The prices of dry goods, and the 
wages of dry goods clerks, seem to me to have remained 
about the same ; this, of course, does not exhaust the list. 
I doubt whether the purchasing or paying power of the 
American dollar owes its depreciation to anything except 
the very remarkable industrial activity which has dis- 
tinguished the past ten years in the United States, and to 
the increasing demands of the members of the trades 
unions and labor unions. In some respects the demands 
and power of the unions have encouraged a class of men 
to neglect their work, or to do poor work, and have com- 
pelled railroad companies, among others, to keep on their 
pay rolls men they did not require: — to this extent the 
purchasing power of the American dollar seems to me to 
be affected by other conditions than those attributable to 
industrial activity." — Morris M. Cohn. 

"Measured by prices, yes. The increased gold supply 
has no more than kept pace with the increased demands 

56 



made upon it. The purchasing power of a dollar, is, in 
my opinion, at least, ten per cent less to-day than in 1897. 
This is certainly true as regards the necessaries of life." — 
F. S. Crum. 

"Undoubtedly." — John Cummings. 

"Undoubtedly."— W. M. Daniels. 

"Unquestionably." — H. T. Davenport. 

"Yes."— Davis R. Dewey. 

"There is no doubt about this. The purchasing power 
of a dollar is less than it was in 1897. How much less is 
a question on which the authorities do not agree, but that 
does not matter so far as the theoretical basis of your ar- 
gument is concerned." — Carroll W. Doten. 

"The American dollar has unquestionably depreciated 
during the past decade (1897-1907). A rise of prices is 
the same thing as a money depreciation. What the causes 
of this depreciation in the United States are is not easy to 
state, as in this country the question is complicated by 
tariffs, etc. Sauerbeck's index numbers in Great Britain 
would, in my opinion, give us a truer measure of the 
amount of the depreciation. A fair estimate would, I be- 
lieve, be thirty per cent and this is due mainly to the in- 
creased supply of gold." — Garrett Droppers. 

"Yes. I do not know of any authority who denies the 
fact." — C. F. Emerick. 

"The prices of many commodities have increased. It is 
difficult to estimate the depreciation of the dollar." — A. 
B. Fairchild. 

57 



"There can be no doubt that the American dollar has 
depreciated to a considerable extent since 1897." — Fred 
R. Fairchild. 

"Yes." — Irving Fisher. 

"Unquestionably. That is, the purchasing power in 
terms of general commodities has fallen." — Willard C. 
Fisher. 

"Yes."— J. D. Forrest. 

"Yes." — A. G. Fradenburgh. 

"Undoubtedly." — George P. Garrison. 

"Undoubtedly." — David I. Green. 

"I believe so. But I think the index numbers of the 
'Economist' shows an appreciation during the past year. 5 " 
Lewis H. Haney. 

"That the American dollar has deteriorated since 
1897, is apparent to all who have given even the most 
cursory study to the production of gold since that time. 
A few years ago the late Mr. Walter S. Logan, an emi- 
nent member of the New York Bar, wrote a most in- 
structive and exhaustive article on this subject. I en- 
dorse all that he said then, and time has justified his con- 
clusions. The best answer that can be made to this 
question is his article which I have no doubt you can 
easily procure." — W. O. Hart. 

"Yes."— R. H. Hess. 

"Yes. About thirty per cent." — Joseph French 
Johnson. 

58 



"It did decidedly from 1897 to October, 1907, although 
there has been a movement in the other direction since 
that time." — E. W. Kem merer. 

"In my opinion the purchasing power of a dollar has 
depreciated about forty per cent since 1897, as indicated 
by the increase, in the price of goods since that time." — 
David Kinley. 

"Undoubtedly, yes." — M. A. Kursheedt. 

"Yes." — Charles H. Leeds. 

"Beyond question gold has depreciated since 1897 ap- 
proximately forty per cent." — W. H. Lough, Jr. 

"Perhaps so — but other causes have probably largely 
neutralized the effect, for the time at least. 

"The tremendous business activity and development in 
this country caused such' a demand for labor and pro- 
ducts that wages and prices advanced rapidly and largely 
at least with little reference to depreciation of gold. The 
rough and reckless actions of the Administration at 
Washington brought on a panic which might probably 
have been avoided by sane and reasonable action though 
development and extravagance were so far outrunning 
capital and income as to make it certain that there must 
be a curtailment. 

"Prices of goods have fallen heavily (not owing to 
appreciation of gold, of course) but labor wages have not 
generally fallen in at all the same ratio. So in fact and 
partly in consequence many men are out of work . Rail- 
road gross and net receipts have been greatly reduced, 
without reduced wages or advanced freight rates." — 
Arthur T. Lyman. 

59 



"Yes."— Roswell C. McCrea. 

"It depreciated from 1897 to 1907. Since October, 
1907, it has been slightly appreciating." — John Martin. 

"Yes, undoubtedly." — Royal Meeker. 

"Yes, undoubtedly." — Charles W. Mixter. 

"No. The purchasing power of the dollar has de- 
creased, but this is not 'depreciation.' The purchasing 
power of the dollar has decreased because the wages, 
prices of commodities, railroad rates, etc. have in- 
creased. The value of the dollar is the same and will re- 
main the same because it has been established as a stand- 
ard with which to measure other prices. Money is not 
a commodity. To treat it as a commodity has been, in 
my opinion, the great blunder of many economists. It 
is a social force created by society to do social work, and 
as 'money' is beyond the conditions which affect the rise 
and fall in prices of commodities, wages, etc. (But this 
is too important a subject to be discussed in a mere note. 
It is worthy of careful elaboration and conscientious dis- 
cussion, and in my opinion, when its real significance is 
fully grasped will help economists to get together on 
practical grounds for the solution of some of the great 
economic and social questions which now confront us.)" 
— James B. Morman. 

"The American dollar has without doubt depreciated 
in value since 1897. This seems to be a consequence of 
the increase in the world's supply of gold which began 
about 1892 and has since continued, while the period of 
falling prices reached the critical point in 1897, when 
prices followed the upward course in, as it were, sympa- 
thy with the gold supply. Certain variations in the prices 

60 



of protected commodities should of course be discounted 
in an argument based on these facts." — George S. Moy- 
nahan. 

"Yes."— H. T. Newcomb. 

"Granted that the American dollar has depreciated in 
purchasing power since 1897." — L. W. Parish. 

"Yes." — Julius H. Parmelee. 

"The statistics that you have cited demonstrate that the 
dollar has depreciated. Gold is undoubtedly cheaper. In 
1897, Bryan, thinking that the annual gold production 
would be a decreasing rather than an increasing addition 
to the world's store, advocated the free coinage of silver 
in order to increase the amount of the circulating me- 
dium and put a stop to the falling prices. The circulat- 
ing medium has increased from twenty-one dollars per 
capita in 1896 to thirty-five dollars per capita, in 1908, but 
by the addition of gold and not silver." — Warren M. 
Persons. 

"Yes."— Carl C. Plehn. 

"I believe it has." — Jesse E. Pope. 

"Beyond a doubt."— H. H. Powers. 

"I believe it has." — L. G. Powers. 

"Yes." — Lawson Purdy. 

"As the standard of value, it is an insult to ordinary 
intelligence to suggest that the dollar could depreciate." — 

H. W. QUAINTANCE. 

61 



"In terms of wages, prices and rates, the American 
dollar has unmistakably depreciated since 1897." — 
Charles Lee Raper. 

"I think the fact is undisputed by the well-informed. 
Personally I am inclined to think that money exchange 
value depreciates faster than the gold supply increases, 
because only part of the gold goes into money or bank 
vaults, and the rest into the arts; and also because gold 
serves as a basis for a huge credit structure, which for 
psychological reasons builds up even faster than its gold 
base, and periodically gets top-heavy, but in the nature of 
things never shrinks back to its old proportions." — 
Walter T. Ray. 

"It seems to me there is no reasonable doubt it has, 
and that any one who claims it has not depreciated, de- 
fends an untenable position." — Gardner Richardson. 

"It appears so, from the great mass of current prices. 
I take this depreciation to be strictly a mercantile one, 
and do not believe there has occurred in the interval men- 
tioned a sensible depreciation of money from either pro- 
duction of money (metal) or issuance of currency. 
Therefore, the price effects are more various and com- 
plex. They may be quite as fictitious as if caused by 
currency manipulation, but they seem to have more points 
of origin." — Philip A. Robinson. 

"Yes; the index number you quote from the Bulletin 
of Labor indicates, in my opinion with a fair degree of 
accuracy, the extent of the depreciation." — Henry R. 
Seager. 

"That it has, seems to me evident." — J. Allen Smith. 

62 



"The purchasing power of the dollar has undoubtedly 
been impaired. " — N. I. Stone. 

"Yes." — George S. Sumner. 

"Yes." — Frank J. Symmes. 

"I think no intelligent observer of our time can doubt 

this." J. A. TlLLINGHAST. 

"Yes, but it had appreciated for a considerable time 
prior to 1897." — Edson Newton Tuckey. 

"Yes."— E. B. Waller. 

"Yes."— C. M. Walsh. 

"It evidently has. Index numbers kept by the London 
Economist show a rise of prices of thirty per cent between 
1896 and 1907, in England. Our records indicate a some- 
what! greater rise in prices, or from thirty-three to forty 
per cent. But this change in prices is not all due to the 
increase in the production of gold ; part of it is due to the 
large additions of paper money to the gold." — A. J. War- 
ner. 

"No one knows. If it has, the quantitative theory of 
money preached by the free silver ites in 1896 is estab- 
lished. Then, I thought I had convinced myself that this 
theory was not the controlling factor in the matter of 
prices; I am now half persuaded that I was wrong." — 
D. C. Westenhaver. 

"The American dollar consists of 23.22 grains of fine 
gold. Apparently this amount of fine gold will buy a less 
amount of the commodities of life than it would in 1897. 

63 



If that is the fact and if it is due to the increased output 
of the metal, it may be fairly said that the dollar has de- 
preciated." — Horace White. 

"I am unhesitatingly of the opinion that it has so de- 
preciated and that a prominent, probably the chief, cause 
has been the unprecedented increase in gold production. 
It is for this reason that I regard the eastern attack on 
Bryan for dropping free silver as caused either by ignor- 
ance or dishonesty. (I am not for sixteen to one, by in- 
dependent action of the United States.)" — George Ray 
Wicker. 

"It is just as much depreciated as the level of general 
prices is higher. The rise and fall in the value of a dol- 
lar has no meaning except as reflected in purchasing 
power. Your own statistics show that this purchasing 
power has declined." — M. S. Wildman. 

"I doubt very much if there has been any very large 
depreciation, the increased supply having been quite fully 
taken up by the increased demand, and the cost of tihe 
production on the margin not having greatly varied. The 
statistics needed to determine this are not price varia- 
tion, even in index numbers, but the unobtainable figures 
of cost to a number of mining companies." — A. B. Wood- 
ford. 

"Beyond a doubt." — Lester W. Zartman. 



64 



ANSWERS TO THE FOURTH QUESTION.* 

"It is, even theoretically, impossible to state this change 
in any simple average or single figure. (The reasons for 
this statement are abstruse and may be found in an article 
by the writer in the Journal of Political Economy for, I 
think, December, 1901 and March, 1902). The index 
numbers of the Bureau of Labor, however, are carefully 
prepared and tell the truth in a rough way." — T. S. 
Adams. 

"This is too difficult to estimate with any degree of sat- 
isfaction." — Eugene E. Agger. 

"Approximately thirty per cent." — E. Benjamin An- 
drews. 

"I am unable to make more than a guess at the per- 
centage lost, and beg to be excused." — C. C. Arbuthnot. 

"1897 is a bad year to adopt as a basis of compari- 
son, for the dollar then had an abnormal value, as this 
was in the worst of the depression following 1893. Our 
panic last fall was sharper than that of 1893 in its ef- 
fect on stock exchange values, but the depression follow- 
ing does not seem to be anything like so severe. More- 
over, the prices for 1907, (the last given) were practic- 
ally unaffected as the panic came so late in the year that 
little business was done after it. I am inclined to esti- 



*The fourth question was: "If the American dollar has de- 
preciated since 1897, approximately what percentage of its value 
in that year has it lost?" It should be observed that in many 
cases the answers to the third question also answer this one. 

65 



mate the depression at between ten per cent and twenty 
per cent and probably nearer twenty per cent in ten years, 
say two per cent per annum, which is less than twenty 
per cent in ten years." — N. T. Bacon. 

"A basis must be given to figure such a reply. It is, of 
course, possible for the exchange value of gold and Ameri- 
can money to remain absolutely the same and yet have 
practically all American commodities increase in price. 
In such case the average appreciation of all commodities 
might be considered as a depreciation of the common de- 
nominator. The variation in the difference is so large 
that each item must be considered in itself." — John 
Balch Blood. 



"This is largely a matter of speculation with me, but I 
would say from thirty to forty per cent." — James E. 
Boyle. 

"It has lost about one-third of its purchasing power." — 
Charles J. Bullock. 

"Not qualified to say without more study than I can 
give the question at present." — Victor S. Clark. 

"That is a question for the expert statistician. Only 
such investigations as Jevons undertook could tell. A 
rough guess would be a minimum of twenty per cent." — J. 
W. Crook. 

"No exact measure possible. About twenty or thirty 
per cent." — F. R. Clow. 

"Should say not less than ten per cent." — F. S. Crum. 

"Its depreciation is measured by the rise in prices." — 
John Cummings. 

66 



"Here again an involved statistical investigation is nec- 
essary. Not only index numbers in this country, but 
abroad must be compared. Two things are very impor- 
tant to remember, however: (i) that only a part of the 
more copious gold output of recent years has gone into 
addition to the world's coin stock, — the rest being con- 
sumed in the arts: (2) some considerable part of the rise 
in general prices in the United States since 1897 has been 
due to an expansion of credit in excess of even increased 
reserves of gold coin. Without investigation too long to 
enter upon at present, I am not prepared to say that the 
depreciation in the gold dollar has been more than one per 
cent a year since 1897. It may have been more, but 
hardly less."— W. M. Daniels. 

"Should estimate it at something like twenty per cent." 
— H. T. Davenport. 

"Authorities differ, but all the index numbers show a 
rise in prices." — Davis R. Dewey. 

"I have not the time to look this matter up, but sev- 
eral sets of index numbers are available which would 
render it possible to arrive at j an approximate estimate." 
— Carroll W. Doten. 

"The several index numbers used in this connection 
are not at hand. They differ somewhat as to the extent 
to which gold has depreciated, but I think they agree as 
to the general fact." — C. F. Emerick. 

"Do not know." — A. B. Fairchild. 

"An exact answer to this question is, of course, impos- 
sible. I am unable to give an approximate answer with- 
out devoting more time to the study than I am able to do 

67 



at present. The correct way to answer this question is by a 
study of index numbers which show the change in price 
level. The value of money varies inversely as the value 
of other things, that is, the price level. The best index 
numbers to make use of are the following: — London 
Economist, Palgrave, Soetbeer, Sauerbeck, Falkner, Com- 
mons, Dunn, and the United States Labor Bureau. In 
Johnson's 'Money and Currency' you will find an interest- 
ing table, illustrating some of these index numbers, at 
page 112, and a discussion at page 214. The result of these 
index numbers will vary; each index number giving a 
different result. They are rough approximations only, 
but should be exact enough for your purposes." — Fred 
R. Fairchild. 

"Thirty per cent." — Irving Fisher. 

"I am a long way from my books which contain the 
various tables of general prices. It is a matter of easy 
arithmetical computation. The percentages will, of 
course, be somewhat different according as we use one or 
another of the several accepted tables." — Willard C 
Fisher. 

"The fact of depreciation is easily established but the 
exact measurement of the depreciation is not so easily 
reached. I do not believe that any of the statistical meth- 
ods employed are entirely adequate for this purpose." — 
J. D. Forrest. 

"I could not state exactly the depreciation. I should 
say about thirty per cent." — A. G. Fradenburgh. 

"I am not prepared to give the statistics. Can you not 
rely on the figures you quote from Bulletin 75 of the 

68 



United States Bureau of Labor? The percentage of de- 
preciation can be easily deduced from these." — George 
P. Garrison. 

"About thirty per cent."— R. H. Hess. 

"This question is very difficult for me to answer, par- 
tially for reasons given in answer to question No. 2." — 
W. O. Hart. 

"Prices rose forty-four per cent. Dollar declined in 
proportion of 144 to 100 or as 100 to 70 — thirty per cent 
decline on dollar's purchasing power." — Joseph French 
Johnson. 

"The Bureau of Labor's Index figure for the prices of 
all commodities indexed in 1897 was 89.7, in 1907, iti 
was 129.5. This represents an increase in the general 
price level of the various commodities included in Bu- 
reau's table of forty-four per cent, or a decline in the pur- 
chasing power of money of thirty-two per cent. It 
should be noted, however, that this is a comparison of ex- 
tremes, 1897 being the year of lowest prices in recent 
years and 1907 the year of highest prices. The London 
Economist 's index figures show a decline in English 
prices of seventeen per cent from June 1, 1907, to Sep- 
tember 1, 1908. The Bureau of Labor's index figures for 
September, 1908, are not available, but in view of the de- 
pression in the United States it is reasonable to expect a 
decline in the United States as great or greater than that 
of England." — E. W. Kem merer. 



"It is difficult to state the percentage, but it seems to 
me that the dollar has depreciated thirty-five per cent." — 

M. A. KURSHEEDT. 

69 



"Roughly, thirty-three and one-third per cent and it is 
useless to attempt anything beyond a rough calculation." 
— Charles H. Leeds. 

"Roughly speaking, forty per cent." — Roswell C. 
McCrea. 

"As shown by the index numbers for 'all commodities' 
it has (approximately) depreciated in the ratio of 90 to 
130. Ninety gold dollars in 1897 would purchase as 
much as one hundred and thirty gold dollars would pur- 
chase in 1907, a diminution in value of 44.44 per cent. 

"But in 1908 the gold dollar has appreciated." — John 
Martin. 

"Impossible to say accurately. Twenty-five to' fifty per 
cent according to locality, would measure about the rise 
in prices of most staple commodities, corresponding to a 
fall in the value of gold from twenty per cent to thirty- 
three and one-third per cent." — Royal Meeker. 

"We have no means of knowing the quantitative result 
other than by index numbers. Probably they are suffi- 
ciently correct." — Charles W. Mixter. 

"The loss of value in the American dollar may be 
viewed from the normal and real points of distinction in 
the manner suggested in the first question. The normal 
loss, based on its general exchange value, irrespective of 
its possessor, is perhaps approximately forty per cent 
from all causes, amongst which I believe, we should in- 
clude that arising from the tariff when the American 
(United States) dollar is specified." — George S. Moy- 

NAHAN. 

"The index numbers of the Bureau of Labor for 1897 
and 1907 were 89.7 and 129.5 respectively. This would 

70 



indicate an increase of 44.37 per cent in prices which is 
equivalent to a depreciation of standard money of 30.73 
per cent. These 'index numbers' do not represent, how- 
ever, all the expenditures entering into the average family 
budget. It is safe, however, to say that the depreciation 
is not less than twenty-five per cent." — H. T. Newcomb. 

"Granted that it has depreciated twenty-five per cent." 
L. W. Parish. 

"It is hard to say, and I would not venture a statement. 
Probably fifteen or twenty per cent, at the least." — 
Julius H. Parmelee. 

"It is largely due to this great addition to our circu- 
lating medium that prices have risen twenty-five to fifty 
per cent since 1897." — Warren M. Persons. 

"The several published index numbers are attempts to 
answer this question literally. 

"To answer the spirit of the question in percentage 
form is hardly possible. The effect of industrial depres- 
sions and of periods of prosperity on prices account for 
the extreme fluctuations. Nobody has the wisdom en- 
abling him to separate the changes due to the money 
changes alone from those due to other causes." — Carl C. 
Plehn. 

"I am unable to give you an accurate answer." — Jesse 
E. Pope. 

"Depends on your conception of the true standard of 
value, a much controverted point. At least twenty per 
cent." — H. H. Powers. 

"I would not wish to answer this question with any 
great assurance of definiteness, but as near as I can de- 

71 



termine, it has, not less than ten and possibly more of a 
percentage." — L. G. Powers. 

"I believe authorities differ as to the extent of the de- 
preciation of the American dollar since 1897, but are 
agreed that that depreciation has been over twenty-five 
per cent." — Lawson Purdy. 

"I am inclined to think that its depreciation since 1897 
has been near ten to fifteen per cent." — Charles Lee 
Raper. 

"Perhaps even forty per cent." — W alter T. Ray. 

"This is a difficult question to answer, and one on 
which opinions and even conclusions based on figures 
would widely differ. A fair estimate would be that a dol- 
lar has one-third less purchasing power now than in 
1897." — Gardner Richardson. 

"I am not in a position to give a well-qualified opinion. 
I believe, however, there is a disposition to overrate the 
percentage of loss. My conjecture would be that, for the 
broadest price level our dollar has shrunk some twelve 
to fifteen per cent, possibly a little more than fifteen per 
cent. 

"Caution: Statistical estimates of such a change, ap- 
plied generally, should not be made, not interpreted with- 
out carefully weighing the item selected." — Philip A. 
Robinson. 

"Price level 1907, 129.5 
"Price level 1897, 89.7 



"Rise in price level 39.8 which is forty-four per cent 
of 89.7, therefore prices rose forty-four per cent. If 

72 



prices rose forty-four per cent it required $1.44 to pur- 
chase in 1907 what one dollar would purchase in 1897, 
that is, one dollar would purchase only 100-144 times 100, 
or sixty-nine per cent of what it would before, therefore, 
the dollar depreciated thirty-one per cent, — say thirty per 
cent." — Henry R. Seager. 

"I would not attempt to say how much general prices 
have risen since 1897, but if we could find a list of com- 
modities whose price changes are fairly representative 
of the changes in the prices of goods generally since that 
date, the average increase in the prices of these selected 
commodities would indicate the extent of depreciation in 
the dollar since 1897." — J. Allen Smith. 

"For approximate estimates see publications of the Bu- 
reau of Labor." — N. I. Stone. 

"It is impossible for me to say without far more study 
than I have given the matter." — George S. Sumner. 

"The percentage of value lost in the depreciation of the 
dollar since 1897 is in proportion to the excess of money 
now in use over the amount in use at that time; — elimi- 
nating from the consideration in both cases money on 
storage in mints and treasuries and held only for emer- 
gency use, such dollars on storage being more available 
for use in an emergency, but otherwise having no influ- 
ence on nominal or real values of any kind. An ad- 
vance in the price of commodities may be caused by many 
reasons and may be oftentimes the cause rather than the 
effect of a change in the value of the money standard." — 
Frank J. Symmes. 

"As to the amount of depreciation I have made no such 
study as would justify the expression on my part of a defi- 

73 



nite estimate. But it is my conviction, from such study 
as I have been able to make of that question, that the dol- 
lar of tto-day does not purchase more on the average than 
seventy-five cents would ten years ago. I feel sure the 
American dollar has lost at least twenty-five to thirty- 
three per cent of its purchasing power." — J. A. Tilling- 

HAST. 

' 'Tables of index numbers of prices are supposed to in- 
dicate variations in the purchasing power of trie standard 
value, — at least in terms o<f the commodities concerned. 
Those given by the Department of Commerce and Labor 
show that the index number of prices advanced nearly 
forty- four per cent during the decade from 1897 to 1907. 
It should not be assumed, however, that prices are that 
much higher than the average for the past several de- 
cades. Eleven years ago prices were much lower than in 
previous years and very much lower than the average for 
the last half of the nineteenth century." — Edson Newton 

TUCKEY. 

"About twenty per cent." — E. B. Waller. 

"The answer can only be rough, because of the defec- 
tive collection not so much of prices as of quantities and 
the incorrect methods employed in averaging them. 

"But if the Labor Bureau's figures be accepted, they 
indicate a depreciation of the American dollar between 
1897 and 1907 equal to the inverse of the rise of the in- 
dex figures, 89-7-i29.5=.693, by 30.7 per cent. But the 
Sauerbeck figures for English money, show only a rise of 
general prices from 62 in 1897 to 80 in 1907, which means 
a depreciation from 1.00 to 62-8o=.775, by 22.5 per cent. 
The English depreciation need not tally with the Ameri- 
can, but the divergence is not likely to have been so large, 
and part of it must be due to error in either or in both of 

74 



the computations. If we put the American depreciation at 
twenty-five per cent, we should probably be well above 
the truth. Now corresponds to a rise of general prices 
by thirty-three and one-third per cent." — C. M. Walsh. 

"This can only be told by a careful comparison of 
prices in this and other gold standard countries during 
the year and a study of changes in monetary conditions in 
the different countries due to additions of paper money; 
for it is well established that the issue of paper money in 
any one of the gold standard countries, by forcing out 
some part of its gold, may affect the value of the cur- 
rencies of other gold standard countries and prices in all 
such countries. 

"In support of this principle I refer to the first Bullion 
Report of 1810 and the writings of Ricardo, Lord Over- 
stone, Mill and others." — A. J. Warner. 

"So m&ny factors enter in the problem of prices that 
even if the gold production h'as contributed, this ques- 
tion could only be guessed at. Personally I think the gold 
production so far has been only a factor in the recent 
business stimulation, and not the whole or even the larger 
part of the cause. Economists were almost a unit, in 
1896, that the declining prices could be explained without 
reference to the stationary gold production and the de- 
monetization of silver. We had more evidence and a 
longer period of observation then than now." — D. C. 

WESTEN HAVER. 

"Don't know." — Horace White. 

"Average prices have quite certainly advanced not less 
than twenty-five per cent or more than fifty per cent since 
July, 1897. To answer your question directly, therefore, 
I should say that the American dollar has depreciated, 

75 



since 1897, to the extent of thirty-three and one-third per 
cent to twenty per cent of its then value. As I understand 
it, the two sentences above carry the same mathematical 
meaning." — George Ray Wicker. 

"I know of no more reliable data on which to make a 
reply than the statistics you have quoted. It is a problem 
of averages purely." — M. S. Wildman. 

"On the basis of figures you have given it is 135-110 
for railroads, as indicated under question seven on page 
four." — A. B. Woodford. 

"Best indication of the depreciation that we have is the 
index numbers prepared by the Government and by vari- 
ous publications." — Lester W. Zartman. 



76 



ANSWERS TO THE FIFTH QUESTION.* 

"I cannot answer." — T. S. Adams. 

"The obvious conclusion is that wherever prices have 
not been adjusted to the depreciated dollar there has been 
a real decline in such prices." — Eugene E. Agger. 

"In nearly all cases where prices and wages have been 
advanced in terms of dollars and cents the advance has 
been nominal only." — E. Benjamin Andrews. 

"Wages and prices that nominally remain as before, 
are in fact lower when they are considered in relation to 
the general well-being." — C. C. Arbuthnot. 

"The adjustment of wages generally goes on more 
slowly tihan that of commodities but as the last move of 
commodities was down, after a long rise, probably the 
adjustment just now is more advantageous per diem 
than usual for those working, but they are doing so much 
better work than in the don't care atmosphere of a year 
ago that per service rendered, they are probably not re- 
ceiving more than then in purchasing power and perhaps 
not as much." — N. T. Bacon. 

"Competition is not free. The Government, in con- 
trolling the production of the medium of exchange, virtu- 
ally forbids the exchange of labor's products unless the 



*The fifth question was: "What effect has this depreciation 
of the American dollar (if it has depreciated), produced as to 
wages or prices which have not been fully adjusted to the dimin- 
ished value of the standard?" 

77 



producers pay a toll for the right of exchange, under the 
guise of interest on money. Owing to this tax on ex- 
change, a portion of the wealth produced by labor is ab- 
stracted by non-producers and wages instead of being 
equal to the value produced by labor, equal this value, 
minus the amount (from thirty to fifty per cent) which 
with the connivance of those that formulate our banking 
laws, is abstracted by non-producers, from the real pro- 
ducers. ('Wages' is here used in the economic sense, 
meaning recompense for labor' whether performed by 
workmen, foremen, employers, clerks, merchants, teach- 
ers, etc., etc.)" — Hugo Bilgram. 

"Variations in wages and prices usually have their in- 
dividual proximate causes. A depreciation of money 
tends to increase prices and wages when expressed in dol- 
lars. Money depreciation would show by the general and 
uniform increase in wages or prices." — John Balch 
Blood. 

"Wages and prices which have not been raised to meet 
the depreciated dollar have, in effect, suffered an actual 
and real decline, although not a nominal decline." — 
James E. Boyle. 

"It has lowered them." — Charles J. Bullock. 

"It has lowered them." — Victor S. Clark. 

"There has not been a uniform adjustment. In the 
building trades in some cases I think the adjustment has 
been more than made. Some forms of union labor have 
forced wages to points that are truly monopolistic in 
their character. Other forms still lag behind." — J. W. 
Crook. 

78 



"Virtually lowered them." — F. R. Clow. 

"Prices have gone up and wages down. Some would 
say that the value of the dollar has appreciated, but I 
mean relatively to prices, the dollar's purchasing power, 
or real value, has declined." — F. S. Crum. 

"Incomes and prices which have remained fixed nomi- 
nally have really fallen." — John Cummings. 

"A real and serious depreciation." — H. T. Davenport. 

"Impossible to define in exact terms." — Davis R. 
Dewey. 

"(a) It has reduced the real wages of course, if nomi- 
nal wages have remained constant or have not advanced 
proportionately. 

"(b) I again object to the use of price in two senses. 
Assuming, however, that the price of an article in 1897 
was the same as it was in 1907, I should think that some- 
thing must have happened to lower the costj of its produc- 
tion, or that the producer would be making less profit per 
unit of output than before. I should, however, want to 
see his bank account before deciding off-hand that he was 
being ruined by charging the old price." — Carroll W. 
Doten. 

"Every depreciation of money unless extended over a 
very long period has unequal effects on wages and prices 
for the time being. Should general prices and wages rise 
commodities produced in industries where fixed capital is 
largely employed furnish relatively a larger profit. It 
takes time, sometimes a very long time, for these price 
changes to become adjusted. All industries where there 
are fixed charges and rates are likely to suffer." — Gar- 
rett Droppers. 

79 



"All whose wages or whose prices for commodities pro- 
duced have not kept pace with the rise in prices of the 
things they buy are by so much poorer than in 1897, with 
this important exception, namely — employers who by va- 
rious improvements, such as electrification, utilization of 
byproducts, more efficient organization, etc., have re- 
duced the expenses of production may be better off in 
spite of the failure of the thing they produce to advance 
as rapidly in price as the prices of otlher commodities." — 
C. F. Emerick. 

"Do not know." — A. B. Fairchild. 

"The depreciation of the American dollar has caused a 
decline in real wages or prices in all cases where the 
wages or prices have not been fully adjusted to the di- 
minished value of the standard by a corresponding rise. ,, 
— Fred R. Fairchild. 

"The effect is a depreciation of the real income of the 
laborer or the person who lives by selling at the prices 
which have not yelj been adjusted." — Willard C. Fisher. 

"Has caused them to fall relatively." — J. D. Forrest. 

"Wages and prices that have not increased sufficiently 
to compensate for the depreciation have, of course, rela- 
tively fallen." — George P. Garrison. 

"Such wages and prices have relatively decreased." — 
David I. Green. 

"It has undoubtedly meant that laborers whose money 
wages remained constant or rose less than proportionately 
have received less real wages." — Lewis H. Haney. 

80 



"The effect of this depreciation has been to lower in 
effect the wages and salaries of those receiving stated 
compensation. In the large majority of instances that 
have come under my observation, there has been little or 
no increase in such compensation, and outside of cases 
where there has been legislation on the subject princi- 
pally as to public officers, I know of very few instances 
where the adjustment of wages has been sufficient to meet 
the depreciation." — W. O. Hart. 

"Wages and prices of services and commodities the pro- 
duction of which does not involve a considerable element 
of immobile labor or fixed capital, or the control of which 
is not in the hands of a monopoly, have automatically ad- 
justed themselves to the changing standard. Specialized 
labor and capital and monopolies habitually exacting the 
price of maximum returns are liable to suffer a dispropor- 
tionate nominal return and a decreased real return." — R. 
H. Hess. 

"Some laborers have suffered because of the lessened 
purchasing power of their wages. 

"Some producers have also suffered but not to same 
extent as laborers. Brief answer impossible." — Joseph 
French Johnson. 

"Correct answer to this question depends upon the 
meaning of the words 'adjusted to the diminished value of 
the standard.' If a man's wages have not increased pro- 
portionately to the prices of the articles he has been ac- 
customed to buy, his actual income is reduced. 

"A concern may, of course, be paying higher wages and 
higher prices with as great a profit as before, if its busi- 
ness has materially increased, or if improved methods of 
production have been introduced." — E. W. Kemmerer. 

81 



"If nominal wages have not risen in the past twelve 
years in the same proportion as prices, then real wages 
are not as high as they were in 1897. The effect is a 
lower standard of living wherever this has happened, a 
worse condition for the wage earner." — David Kinley. 

"It is manifestly unfair not to increase wages and prices 
so they will be fully adjusted to the diminished value of 
a dollar." — M. A. Kursheedt. 

"Prices appear to have risen somewhat more than 
wages — the per cent of increase in reliable tables shows 
this." — Charles H. Leeds. 

"In this instance the depreciation in the standard of 
value, I should say has affected prices in the following 
order : 

"1. Securities. 

"2. Commodities which are dealt in on the Produce and 
other exchanges. 

"3. Other commodities which are handled in large 
quantities, such as steel rails, brick, lumber, and the like. 

"4. Manufactured products in retail lots. 

"5. Wages. 

"6. Railroad rates. 

"I am inclined to think, although this statement can 
be verified so far as I know by detailed statistics, that the 
prices of all these goods have been adjusted to the 
changed standard with the exception of some grades of 
labor and railroad rates." — W. H. Lough, Jr. 

"In such cases the 'nominal' increase is a 'real' de- 
crease." — Roswell C. McCrea. 

"Wages and prices which have not been fully ad- 
justed to the diminished value of the standard have actu- 
ally decreased." — John Martin. 

82 



"Of course if the dollar has depreciated twenty-five 
per cent and a laborer receives the same money wage in 
1908 that he received in 1897, he really receives only 
three-fourths as much purchasing power." — Royal 
Meeker. 

"It has made them of less worth. Unadjusted, con- 
stant, wages or prices (proceeds of sales of commodities), 
are apparently unchanged; but in reality they are lower, 
since their general purchasing power — general wealth- 
commanding power — is reduced." — Charles W. Mixter. 

"This question should be reversed, viz. : what effect has 
the increase of wages and increased prices of commodities 
had upon the dollar. Ans. Lowered its purchasing 
power. 

"This problem is very simple when we regard the dol- 
lar as a fixed standard which it is. Would it not be ex- 
ceedingly uncertain in commercial dealings if a yard 
measure, a peck, or a pound were only a half-yard, a 
half-peck, or a half-pound to-morrow? These measures 
do not change, but the goods measured in these standards 
fluctuate in price. So with money, as a measure of value, 
it does not change." — James B. Morman. 

"The real depreciation which the United States dollar 
has undergone since 1897 is its decrease in subjective 
value, or the loss which its possessor would subjectively 
suffer, when measuring that loss as a percentage of in- 
come. This loss is many times greater for the laboring 
class than for people of ordinary means, and when com- 
pared with the losses of the rich it is so great that a ques- 
tion arises in my mind whether a real depreciation in the 
value of increments of income above $10,000 has any re- 
ality. From this point of view wages do not seem to me 
to have fully adjusted themselves to the diminished value 

S3 



of the standard. An increase of forty per cent in the 
nominal wages of railway employees on this account alone 
would to my mind be nothing too high. As regards prices 
which have not adjusted themselves to the diminution in 
the value of the dollar, I am of the opinion that wages in 
the industries concerned have lagged behind in adjust- 
ment. The value of labor is determined by the value of its 
products, and it seems to me that abnormally low prices 
must tend to produce abnormally low wages." — George 

S. MOYNAHAN. 

"They have fallen and the loss, per unit of labor or 
product, to the laborer or producer, is measured by the 
diminution in the purchasing power of the wages or prices 
received per unit of labor or product." — H. T. Newcomb. 

"Since real mages depend on the general level of prices r 
they have suffered where they have not kept pace with the 
average price of goods. 

"This is not true of prices and rates." — L. W. Parish. 

"The prices are probably fairly well adjusted by now, 
but many wages, and especially the great number of sal- 
aried incomes, have not received the full benefit of an in- 
crease proportionate to the fall in value of money. Here 
again a definite statement is well nigh impossible." — 
Julius H. Parmelee. 

"The wage earner whose wages have not become ad- 
justed to the increased prices is a loser. If prices have 
gone up fifty per cent he can command only sixty-six and 
two-thirds as much of this world's goods as he could in 
1897. The bondholder receiving a fixed contract rate of 
interest, likewise suffers as the purchasing power of his 
five per cent interest decreases. He could buy more goods 
with the dollars that he loaned in 1897 than with the same 

84 



number of dollars returned to him ten years later. Meas- 
ured in goods his principal has decreased thirty-three and 
one-third per cent." — Warren M. Persons. 

"Reduces them." — Carl C. Plehn. 

"It would have the same effect as a fall in the relative 
prices or wages. For example, a teacher who got $2,000 
a year in 1896 and is still getting $2,000 has really suf- 
fered a decline in salary of not much less than $500.00. 
Of course, the same reasoning is true of railway rates. 
If you charged $10.00 for a certain haul in '96 and to-day 
are charging $10.00 for the same haul, rates have really 
fallen, when prices and wages are taken into account, 
which are in daily constant adjustment to the monetary 
standard." — Jesse E. Pope. 

"All fixed or difficultly modified prices (as wages, pub- 
lished or legal rates, etc.) have virtually lowered." — H. 
H. Powers. 

"This depreciation has affected prices as a whole far 
more than wages, as prices respond to such changes far 
more readily than do wages ; and wages of organized la- 
bor, more readily than unorganized. Doubtless, prices, as 
a whole, have so changed as fully to reflect the deprecia- 
tion of the gold. Real estate and railroad properties do 
not yet reflect fully the change made ; and wages, but lit- 
tle."— L. G. Powers. 

"Wages or prices, which have not increased so as to 
keep pace with the depreciation in money, have actually 
fallen." — Lawson Purdy. 

"It has generally raised nominal wages and prices, but 
in many cases the real wages and prices have slightly de- 
creased." — Charles Lee Raper. 

85 



"The corresponding sellers of services and of goods 
are worse off." — Walter T. Ray. 

"This is a simple question of decreased purchasing 
power of wages on an old standard. Government salaries, 
for instance, fixed by old statutes are entirely inadequate 
for modern demands on the incumbents." — Gardner 
Richardson. 

"My impression is that, unless in a few most favored 
mills and localities, factory wages have not been adjusted. 
The range of virtual sweating scales and bases of pay- 
ment has probably been extended, and the margin for in- 
surance and comfort been narrowed. 

"The rates for services rendered by some of the larger 
and the monopolistic corporations, were already so high, 
relatively, that the depreciation of the dollar has only 
tended to normalize them. The like may be true of a few 
exceptional pay-rolls or parts of pay-rolls." — Philip A. 
Robinson. 

"Real wages are lower in that proportion — except that 
the statistics do not include rent and refer to wholesale 
rather than retail prices — in occupations where 'nominal' 
or money wages are unchanged. Commodities whose 
prices have not risen in this proportion have fallen in 
value measured in 'commodities generally." — Henry R. 
Seager. 

"The depreciation of the dollar is seen in its diminished 
purchasing power, or, which is the same thing, the gen- 
eral rise in prices. But prices do not all rise equally or 
simultaneously. It follows that any class is placed at a 
disadvantage as compared with other classes, if the thing 
which it produces or sells is influenced less by the rise in 
prices than are the things which that class must buy. The 

86 



wage-earner gains something in the regularity of employ- 
ment which accompanies rising prices, but the tardy ad- 
justment of money wages to the new level of general 
prices tends to lower his real wage." — J. Allen Smith. 

"It has had the effect of lowering real wages and prices 
of competitive goods." — N. I. Stone. 

"It would lower the return per unit. Such a lowering 
may be no more than is just and should have otherwise 
been brought about owing to other factors that enter into 
prices or wages." — George S. Sumner. 

"The depreciation of the dollar is in proportion only to 
the increased amount of money per capita in actual use 
and which may vary in different localities and at differ- 
ent times." — Frank J. Symmes. 

"Of course it has had the effect of reducing the real 
income in that which money merely enables us to get for 
our labor or commodities. Yet the process by which this 
reduction comes about is so concealed and gradual that 
the masses do not appreciate the situation." — J. A. Til- 

LINGHAST. 

"Wages and prices which have not risen in proportion 
to the decrease in the purchasing power of the dollar con- 
stitute proportionately lower purchasing power, or ex- 
change value in terms of goods and services." — Edson 
Newton Tuckey. 

"Reduction." — E. B. Waller. 

"We can hardly speak of prices not being adjusted, 
since every price is an element in the measurement of the 
depreciation of the dollar. The adjustment of wages 

87 



means that, for wage-earners to hold their own in com- 
petition with other income earners and income receivers, 
wages ought to rise . in the same proportion as general 
prices, and if they have not done so, this is a fall in the 
rate of real wages, which means that wage-earners are 
suffering on account of the behavior of the monetary 
standard and that employers of labor are gaining at their 
expense." — C. M. Walsh. 

"The adjustment of wages and prices to a changing 
value in money, even in industries in which wage-scales 
are most easily changed, is a slow and difficult process and 
hence the importance of preserving the utmost stability in 
the value of money. In my opinion there is no problem 
more important before the world." — A. J. Warner. 

"Depreciation of the dollar does not, of itself, produce 
any effect on wages. The wage earners produce the effect 
by demanding an increase, although in some rare cases 
the employers anticipate the demand and make the in- 
crease voluntarily." — Horace White. 

"Obviously, quite obviously, it has cut from thirty- 
three and one-third per cent to twenty per cent off from 
the real wages, where no adjustment has taken place. 
Adjustment, therefore, would take place within these lim- 
its of discount and parity. In many cases other indepen- 
dent forces have brought real wages above the '97 level." 
— George Ray Wicker. 

"Lowered them." — M. S. Wildman. 

"Lowered them, of course, in the exact proportion in 
which they have not been fully adjusted." — A. B. Wood- 
ford. 

"Virtually to lower them." — Lester W. Zartman. 

88 



"I do not know. I am not an expert in this particular 
field."— T. S. Adams. 

"No." — Eugene E. Agger. 

"No, neither then nor now — 

"i. In proportion to the charges for transportation by 
other methods than by rail in this country. 

"2. In proportion to the charges for similar services in 
other countries. 

"3. In their proportion to the retail cost of the articles 
transported. 

"4. In the profits derived from them in proportion to 
the profits derived from other business enterprises involv- 
ing similar current expenditures." — W. F. Allen. 

"A very difficult question. I am inclined to think they 
ranged too high in consequence of the same sort of causes, 
acting in the opposite direction which now tend to render 
them too low, i. e. } gold was appreciating from '73 to '97, 
and gold prices that did not apparently fall were really 
growing higher and higher." — E. Benjamin Andrews. 

"If the general level of railway rates as indicated by the 
average percentage earned by the roads throughout the 
United States upon the capital invested is of value as a 
criterion, I am inclined to think that the rates of 1897 
were not too high." — C. C. Arbuthnot. 



*The sixth question was : "Were the freight rates charged by 
the railways of the United States in the year 1897, in your opin- 
ion, generally too high?" 

89 



"No, except in special cases. On the average our rates 
have been better than in any other country, and the service 
better as well. 

"On the other hand, real rates should have declined 
during this period to produce the maximum profit to the 
stockholders, as at that time the rails were not fully em- 
ployed and it was to their interest to stimulate traffic. We 
are now entering another stage where it will be necessary 
to raise real rates to reduce traffic, as the facilities are be- 
coming overtaxed, and it is difficult to increase them, ow- 
ing to the prohibitory cost of terminal facilities." — N. T. 
Bacon. 

"The reports of railroads and statistics bearing on this 
subject available to the public are such that it is hard to 
determine what are proper freight rates. Much evidence 
that has come out recently with reference to rebating 
would indicate that the rates in 1897 were too high. Evi- 
dence also with reference to the issuance of securities 
against railroad properties is such as would indicate that 
considerable amount had been paid in dividends on securi- 
ties which originally did not represent capital, which 
would tend to show that the rates of 1897 were t0 ° high." 
— John Balch Blood. 

"Considering freight rates here and abroad, I would 
say 'No.' I believe the public never felt rates were too 
high, but only that cases of discrimination, rebates, etc., 
made them unequal and hence unjust." — James E. Boyle. 

"My opinion on this point would be of little or no value. 
An intelligent answer to this question would require a de- 
tailed and exhaustive statistical investigation. The im- 
portant point is not whether rates are too high or too low. 
The question is, are they discriminating in 1908, or were 
they discriminating in 1897?" — John E. Brindley. 

90 



"In general I suppose that freight rates were not ex- 
cessive ; but there may have been numerous cases in which 
they were so." — Charles J. Bullock. 

"I do not see how any unqualified answer can be given 
to this question. It might be answered as to specific rates, 
in their relation to the prosperity of particular industries ; 
and to average rates in their relation to railway income; 
but I am not sufficiently informed of rates in these two 
relations to venture an opinion for the railways of the en- 
tire country." — Victor S. Clark. 

"I am unable to answer." — F. R. Clow. 

"I am unable to figure this out, because I have no data 
which enables me to get at the true value of the various 
railroad investments. Since freight rates charged must or 
ought to yield a sufficient profit upon the investment to 
correspond with other investments, the true value of the 
investment is an important, and indispensable matter. 
Then, too, different localities are differently affected. 
Speaking, however, of rates on special articles I would 
say that if the rates existing in 1897 still obtained, many 
present establishments would not have been built up. This 
is especially true of interstate rates." — Morris M. Cohn. 

"I should not say so. When we remember the drastic 
period just preceding and the period just at the present 
and other poor earning periods to come, and the great dif- 
ficulty of finding the organizing ability of a Hill or a Har- 
riman, the rates were not too high." — J. W. Crook. 

"Not as a rule." — John Franklin Crowell. 

"Not prepared to say." — F. S. Crum. 

91 



"They were probably determined then, as at other 
times, largely by consideration of what the traffic would 
bear, and by competition. A railroad rate, whatever it be, 
is bound to be at any given time, both too high and too 
l ow — too high from certain points of view and for certain 
purposes ; too low from other points of view and for other 
purposes. The phrase 'generally too high' has no mean- 
ing except with reference to these specific ends and 
points of view. ,, — John Cummings. 

"Here again I will not venture on an opinion unless I 
am sure that we have a common standard of what consti- 
tutes too high a level of freight rates. In general, freight 
rates are too high if they prevent the moving of the nor- 
mal volume of products, or if they afford a net profit in 
excess of a proper return upon the actual capital invested 
and the risk involved in building and operating railroads. 
They are too low, if they afford so low a margin of pro- 
fit as to make the building or operating of railroads un- 
profitable in the long run. Competent and unbiased 
transportation experts will judge, in accordance with 
these general tests, whether rates in 1897 were too high." 
— W. M. Daniels. 

"Not for the volume of business then handled." — H. 
T. Davenport. 

"The consumer will generally think prices are too high. 
I do not see what absolute standard can be used as a test." 
— Davis R. Dewey. 

"This is too large a question to answer off-hand. Some 
doubtless were and some were not. What do you mean 
by too high ? Is it too high to enable industries to develop 
and prosper, or too high to result in the largest profit to 
the railroads or too high because the railroads were en- 
abled thereby to make excessive profits? 

92 



"It seems to me that this method of approach to your 
real point is utterly futile and even if it were not it would 
be absolutely inconclusive. You have got to prove first 
that railroad charges were reasonable in 1897 and after 
that by a long series of inferences that the same rates or 
practically the same now are not reasonable because they 
are unjust to the railroads. All that such a comparison 
can possibly amount to is to show that there has appar- 
ently been a reduction in the cost of transportation to the 
shipper when rates are compared with the prices in which 
he sells his goods. Whether this is more or less of a re- 
duction than should have been made in justice to all con- 
cerned must be decided on other grounds than a mere 
comparison of wage and price levels." — Carroll W. 
Doten. 

"I do not know. Freight rates are a very complex 
affair. Speaking generally I should think that the rates 
on staple products over trunk lines were not high in 
1897." — Garrett Droppers. 

"As to the average per ton mile rate, I think not." — C. 
F. Emerick. 

"No. Discrimination was the great evil. Some local 
rates were very high." — A. B. Fairchild. 

"The answer to this question must be a matter of 
judgment. The only persons qualified to give such judg- 
ment are those who are experts in railway economics. 
I do not consider myself competent to express an opin- 
ion." — Fred R. Fairchild. 

"If by generally you mean universally, certainly not ; if 
you mean in many cases, I should certainly say yes. (The 
railway business is a quasi-public business ; and any rate 

93 



is too high which returns to the capital actually invested 
more than the prevalent rate of income from safe busi- 
ness investments. Just so, any rate of postage is too 
high if it is much more than the cost of the actual ser- 
vice ; and any rate of taxation is too high, if it brings in 
a surplus which cannot be expended for the common 
good." — Willard C. Fisher. 

"Generally not." — J. D. Forrest. 

"No. It could well be to the advantage of the country 
to have rates raised enough to correspond with the depre- 
ciation in the dollar." — A. G. Fradenburgh. 

"I believe so." — George P. Garrison. 

"Perhaps not in general though some were, but the 
average rates should decrease as the amount of traffic in- 
creases." — David I. Green. 

"In my opinion the average freight rate was not too 
high. This does not mean that I think all rates were rea- 
sonable. " — Lewis H. Haney. 

"Not being in business, I know comparatively little 
about railroads, but from my reading and general inter- 
course with business men in this section of the country, 
the general opinion is that railroad rates were too high in 
iSgyJ'—W. O. Hart. 

"As measured by legitimate costs of operation and jus- 
tified fixed charges the level of rates in 1897 was too 
high."— R. H. Hess. 

"I do not know." — Joseph French Johnson. 

94 



"I have never made a sufficient study of this question 
to be justified in expressing an opinion. In 1897 the 
railroads were quite generally complaining that rates 
were too low as the result of the depression of 1893- 
1897; and there was, I believe, a very large increase of 
rates in 1900. 

"A general answer to your question I should think, 
would be dangerous, because of the different rates (1) 
on different roads, (2) on different kinds of traffic 
(through and local), (3) and on different classes of 
commodities." — E. W. Kemmerer. 

"I am not prepared to express an opinion on this ques- 
tion." — David Kinley. 

"I am not sufficiently conversant with the freight 
rates charged in 1897 to be able to answer this question." 

M. A. KURSHEEDT. 

"No. Net earnings were not excessive, considering the 
risks of investment and the supply of capital. And since 
the real rates have been less, the roads have had difficulty 
in getting along." — Charles H. Leeds. 

"This question, it seems to me, does not admit of any 
definite answer. I do not know of any standard by which 
railroad rates as a whole can be decided to be either too 
high or too low." — W. H. Lough, Jr. 

"Probably not, — considering the need of further and 
better equipment — at present there is a pressing need of 
new tracks (i. e., when business was active and when it 
is again in normal condition). The public demands lower 
rates which prevents needed improvements and reckless 
speed which the tracks are not fit for." — Arthur T. 
Lyman. 

95 



"Generally, no." — Roswell C. McCrea. 

"This question can be answered only when much ad- 
ditional data are supplied, including, 

"(a) The physical value of the roads. 

"(b) Their total capitalization. 

"(c) Their gross and net earnings. 

"But lines are so long and the character of their con- 
struction, traffic, etc., varies so widely that any 
generalization about rates is probably wrong. Each line 
should be considered separately. Rates that would be 
outrageously high in New York or Pennsylvania might 
be ruinously low in Texas or Arizona." — John Martin. 

"It is not possible to answer this question." — Royal 
Meeker. 

"No."— Charles W. Mixter. 

"I do not think they were ; but this is a hard question 
to answer. 'Too high.' What standard are we to meas- 
ure by? Did the rates charged bring high dividends to 
stockholders ? If so, the rates were too high ; if not, they 
may have been just and equitable, or, perhaps, too low. 
But I cannot say." — James B. Morman. 

"Freight rates charged by the railways of the United 
States in the year 1897 were not too high. Since, how- 
ever, there seems to be an abnormal advance in the price 
of railway supplies and a slight (though insufficient) ad- 
vance in wages, an advance of freight rates of fifty per 
cent above those of 1897 would on this account be justi- 
fiable were not also another fact operative. This other 
fact is one not generally recognized. It is the increased 
efficiency of every dollar passing through the hands of 
the railways from the point of view of railway technique. 

96 



The equipment purchased for $1.50 to-day is much more 
effective than the corresponding equipment purchased for 
$1.00 in 1897. A fair dividend may therefore be paid 
to stockholders at a small increase in rates. To deter- 
mine the proper amount of increase is the business of the 
Interstate Commerce Commission, or other authorized 
parties, though the railways may act of their own accord. 
(See article on 'The Needs of the Railroads' in Political 
Science Quarterly for September, 1908)." — George S. 

MOYNAHAN. 

"No. Conclusive evidence that railway charges were 
not generally too high in 1897, and have not been gen- 
erally too high since that year, is to be found in the large 
and steady increase of the per capita consumption of rail- 
way services. Unjust exactions cannot coincide with a 
great and general augmentation of consumption. If 
railway rates had been too high they would have impeded 
the local specialization of industrial functions — it is plain 
that cheap railway transportation has vastly augmented it 
and had done so by the year 1897. The population of the 
United States in 1880, 1890, 1895 and 1897, the number 
of tons of freight carried one mile by the railways in the 
same years and the number of tons of freight carried one 
mile by railways per capita of population appear below: 









Ton mileage 


fear. 
1880 
1890 
1895 


Population. 

5o,i55,783 
62,622,250 
69,043,000 


Ton mileage. 
32,348,846,693 
76,207,047,298 
85,227,515,891 


per capita. 

645 
1217 

1234 


1897 


71,704,000 


95,139,022,225 


1327 



"In addition, American railways rates were in 1897 as 
they are at present, the lowest in the world; the lowest 
consistent with fair compensation to labor, and too low 
to afford a return to capital equal to that in other in- 
dustries involving similar risk." — H. T. Newcomb. 

97 



"I do not consider myself a good judge of the justice of 
railroad rates. According to your own basis, they should 
have been very low compared with rates previous to 1890, 
since general prices were lower between 1890 and 1897 
than for many years before. (See statistics by Comp- 
troller of the Treasury, Roberts.)" — L. W. Parish. 

"A stiff question to answer off-hand. Probably not in 
the main; the conditions in different sections vary too 
much to admit of a general statement." — Julius H. 
Parmelee. 

"In my opinion it is impossible to tell whether freight 
rates were or are too high or too low without a physical 
valuation of the railway properties. The various and in- 
tricate methods of financiering used do not make it easy 
to answer the question, 'What is a reasonable rate ?' " — 
Warren M. Persons. 

"Judging solely by the fact that the railroads found it 
to their advantage to reduce them in face of the deprecia- 
tion of the currency, yes." — Carl C. Plehn. 

"No, if you will permit me to say so, we suffered from 
favoritism rather than from high rates. But this is 
largely of the past. As a whole, railway rates in this 
country have been very low compared with other coun- 
tries, and with the difficulties which have had to be over- 
come." — Jesse E. Pope. 

"They probably would be too high now if the dollar 
had not depreciated. This may have scaled them too 
much." — H. H. Powers. 

"I have not studied the question of railroad rates suf- 
ficiently to give an answer." — L. G. Powers. 

98 



"I don't know. Freight rates should be sufficient to 
pay the actual cost of production of the railway. When 
the cost of production of the railway is unknown it is im- 
possible to determine what would be a fair rate." — Law- 
son Purdy. 

"I am not an expert on the cost of running a railway, 
but the salaries paid and dividends declared by some of 
the roads indicate that they were not running at a loss 
and that those that did run at a loss had mismanagement 
or the combination of other roads to blame for it. I do 
not understand that it is the 'general' average of rates 
which is causing dissatisfaction, but rather the irregu- 
larity of rates as between places, persons and times." — H. 

W. QUAINTANCE. 

"No, I think that freight charges in 1897 in the United 
States were very reasonable indeed." — Charles Lee 
Raper. 

"I do not know ; probably not." — Walter T. Ray. 

"No — it does not seem to me they were. There was 
undoubtedly unjust discrimination rife at that period, and 
exactly what 'the freight rates charged' means is indefi- 
nite. Published rates were rebated by more than half. 
That puts the railroad in a bad light, but still the rates 
were certainly not inordinate, in comparison to the ser- 
vice rendered at all events." — Gardner Richardson. 

"I would answer, 'no, probably not,' provided we are to 
accept as normal all the regular and usual disbursements 
of the railways on account of freight service, or on ac- 
count of conducting transportation generally. I use this 
latter phrase, not in the technical sense so much as stand- 
ing for the railway business in the whole of its economic 
and political relations." — Philip A. Robinson. 

99 



"No, but general statements, about a problem that is 
essentially one of intricate details seem to me to be of no 
great value. No doubt some rates were too high, doubt- 
less others were too low to be fairly remunerative. My 
negative answer is based on general considerations and 
is an impression only." — Henry R. Seager. 

'This is a question I would not attempt- to answer in 
the time and space at my disposal here." — J. Allen 
Smith. 

"I have not studied this question." — N. I. Stone. 

"Not generally. The change in amount of traffic in 
the past ten years is such that justice demands a lowering 
of rates in many instances at least as much and in some 
cases more than any possible lowering of rates from de- 
preciation of money standard — for instance — fixed 
charges in certain sections can now be divided between 
twenty trains per day instead of twelve — so warrant a 
material lower rate per car." — George S. Sumner. 

"If it is to be admitted that the railways are justified in 
making rates for the purpose of building extensions and 
adding increased capital to their business — No. 

"If rates are to be made, as in the final solution of the 
problem they must, solely upon the actual cost of service 
directly involved — Yes. 

"The building up of feeders to a railway line, the cut- 
ting of rates to meet water competition, to be made up 
by excessive rates to non-competitive points, and the hun- 
dred and one reasons upon which railways base their pres- 
ent rates must ultimately give way to a rate based upon 
the actual cost of service, viz., the cost of terminal hand- 
ling, operation, maintenance and insurance of the goods 
on the track alone over which they are transported." — 
Frank J. Symmes. 

ioo 



* 4 I could not give an opinion of any value on this point 
for lack of experience and information," — J. A. Tilling- 
hast. 

"They were probably not 'generally too high' although 
I have not reached a final opinion, as yet, based upon sta- 
tistical investigation." — Edson Newton Tuckey. 

"Do not know. The great trouble with this whole dis- 
cussion is that you can not class railroads with other cor- 
porations. They have special privileges, sometimes mo- 
nopolistic franchises. Some railroads are economically 
conducted. Others have graft for the sons of officials, 
etc. Again some railroads have watered their stock be- 
yond the unearned increment to which they may be enti- 
tled. There is a good deal of dispute about the calcula- 
tion of railroad rates. 

"Your questions are well arrayed to bring out the de- 
sired answer (reduction) but you omit the very ques- 
tions which are in dispute to-day. It is not so simple as 
you would think it." — E. B. Waller. 

"I have no information on the subject. But it may be 
noted that the question is the inverse of what might have 
been asked in 1897 compared with the years 1883-9 when, 
if Sauerbeck's figures may be relied upon, general prices 
were as high as they were in 1907. Just as the trend of 
your questionaire is to bring out that railway rates are 
now too low, the result of a similar investigation then 
made might have shown that railway rates were then too 
high. And this would have been all the more likely be- 
cause in 1907 the fall of general prices (the appreciation 
of money) had been going on not merely for ten years, 
but for twenty-four (since 1873)." — C. M. Walsh. 

"In particular cases, yes, but not generally." — A. J. 
Warner. 

101 



"Freight and passenger rates were too high then and 
are too high now, on any system of honest, real capitaliza- 
tion and payment for service rendered." — D. C. Westen- 
haver. 

"No."— Horace White. 

"Probably not for the year 1897, with the traffic of that 
year. Probably not, if viewed in their bearing on the traf- 
fic of 1892-1897. For many roads and sections, they may 
well have been too low. But here I must begin dissent 
from the economic value of your line of inquiry. Rail- 
ways are businesses of increasing return to an extent that 
few other kinds of business share. Railways are natur- 
ally monopolies. Therefore, if your inquiry is to deter- 
mine what are fair rates, from the point of view of the 
stockholders, you must seek the answer by another route. 
A low rate measured by proportion of rate to value of 
commodity carried may be an extortionate rate, from the 
point of view of net earnings on investment. The signi- 
ficant relation here is not that between freight paid and 
value of commodity, but between rate and earnings." — 
George Ray Wicker. 

"Probably not, in general." — A. B. Woodford. 

"Probably not. The country was just emerging from a 
long depression, especially for the railroads, and rates in 
general were low." — Lester W. Zartman. 



102 



ANSWERS TO THE SEVENTH QUESTION.* 



"A reduction. Railways might still, however, be mak- 
ing greater profits than in 1897 ; and present rates might, 
theoretically, be still too high. It is entirely possible, 
however, that they are too low. Your real problem, I 
think, should be settled — and commonly be settled, — in 
another way." — T. S. Adams. 

"Undoubtedly a reduction. But this reduction might 
be offset by improvements in the methods of transporta- 
tion not involving increased or at least proportionately 
greater outlays. To understand the effects of the real 
reduction of rates not only wages and the price of the ma- 
terials must be taken into account but also the effect of 
these things on your units of costs. It may be that the in- 
crease in the volume of business has been much greater 
(proportionately) than the increase of costs and such a 
condition might counteract entirely the loss due to a de- 
cline in the real rate." — Eugene E. Agger. 

"Unquestionably a reduction, unless the rule of three is 
an incorrect mathematical principle." — W. F. Allen. 

"Reduction of course." — E. Benjamin Andrews. 

"Reduction." — C. C. Arbuthnot. 



*The seventh question was: "Assuming that $1.35 will pay 
for only as much labor of railway employees and as much railway 
equipment, fuel and other materials as $1.00 would buy in 1897, 
and that nominal railway rates had been so adjusted that it re- 
quired $1.10 to pay for railway services that $1.00 paid for in 
1897, would the comparison between real railway rates at the dif- 
ferent times show an advance or a reduction?" 

IO3 . 



"On the average about seventy per cent of railroad re- 
ceipts go for expenses and thirty per cent for interest and 
dividends and reserve funds. 

"On the whole this would show a reduction, and in my 
opinion just about the reduction called for to produce the 
best results for the owners of the railroads." — N. T. 
Bacon. 

"Allowance must be made, obviously, for improved 
economy of organization and operation if any, and also 
for increased purchase of railway service (both passen- 
ger and freight, increasing earnings more than expenses) 
if such has occurred. Elimination of wastes involved in 
competition or otherwise might offset a larger or smaller 
proportion of increase of cost though rise of wages and 
prices or even more than offset it." — Emily Green 
Balch. 

"The assumptions here are hardly sufficient. When you 
take into account that the interest rates have gone down, 
that the efficiency of labor in some cases has increased, 
that the efficiency and output of recent apparatus is great- 
ly improved, that great economies have been effected by 
the perfection of organization and the increase in the vol- 
ume of business over the same tracks, it would seem that, 
under the conditions named, the real railway rates as com- 
pared with labor and commodities were about the same. 
It is hard to estimate the items of increased economy and 
the effect of a lower rate of interest, especially as the in- 
terest on the bonded indebtedness has nominally remained 
the same." — John Balch Blood. 

"A substantial reduction, in my judgment." — James 
E. Boyle. 

"On the basis of these assumptions, I believe that real 
railway rates have been reduced. At least I am willing to 

104 



admit that this is true. In your questions, however, you 
do not make clear to what extent the increased volume of 
traffic has modified earnings." — John E. Brindley. 

"In comparison with the cost of labor and materials 
real railway rates would show a reduction. It should not 
be overlooked, however, that the advance in prices has not 
increased the amount of money needed to pay interest 
charges, rentals, and other charges depending upon past 
contracts." — Charles J. Bullock. 

\ 
"From the point of view of the railway, omitting the 
possible variation in fixed charges for capital, there would 
be a reduction of real rates. From the point of view of 
the shipper, this reduction would be conditional upon a 
corresponding advance in the nominal price of the com- 
modities shipped." — Victor S. Clark. 

"A reduction."— F. R. Clow. 

"I think to answer that question intelligently and to 
carry weight would require that one be a railroad ex- 
pert and an expert accountant. On the face of it, it 
would look as if the rates were reduced." — J. W. Crook. 

"The comparison would show an advance but not a cor- 
responding advance to that in cost of labor and materi- 
als." — John Franklin Crowell. 

"A reduction of from twenty to twenty-five per cent." 
— F. S. Crum. 

"From point of view of the railroad, to the extent that 
the wages of labor of railway employees enters into cost 
of service rendered, real rates have fallen. This might be 
neutralized by reductions in other items of railroad ex- 

105 



penditures. So far as the community is concerned, rail- 
road rates have fallen only in so far as general prices 
and incomes, including wages, generally have risen more 
than ten per cent." — John Cummings. 

"If these were the only factors involved, President 
Hadley's statement quoted in your enclosure would cover 
the case. But, if what I can learn from certain shippers 
be true, they now very commonly pay the published rate, 
and in 1897 and until recently they often obtained a rate 
below the published rate. So that the actual rate paid, 
and not the printed tariff must be considered. If the 
actual rate per ton mile received be taken as the basis of 
comparison, it is incumbent on the roads to disclose to 
what extent the roads paid a low rate on commodities 
such as coal in which railroads had an indirect interest. 
Moreover, if a decline in the rate per ton-mile permitted 
such an expansion of traffic that net receipts showed a 
gain, I do not see that the carriers should complain that 
the price paid per ton-mile had declined while articles of 
commerce commanded a higher price per unit. In short, 
the rightful grievance of the carrier, if he has one, should 
be directed not to showing a fall in the price paid for 
transportation per ton-mile (whether or no other produc- 
ers are or are not getting more per unit of output) but to 
showing that net profits accruing to carriers are affected 
unfavorably relative to the net profits of producers gen- 
erally." — W. M. Daniels. 

"But the fact that while other marketed facts have av- 
eraged a twenty-five per cent advance in market price, 
railroad properties have scored several fold this increase 
as expressed in stock quotations and as based on in- 
creased dividend-paying power, proves that at the new 
volumes of traffic, the rates and the net earnings of the 
later years were over high. It may, of course, be justi- 

106 



fiable, with advancing wages and raw materials, to raise 
the transportation rates ; whether this is true or not must 
depend upon whether the economies attendant upon in- 
creased traffic are sufficient, per unit of goods transport- 
ed, to offset the higher levels of expenditure. The trend 
of dividends from 1897 to 1907 is fairly definite in reply 
upon this issue. It is ultimately the purchasing power of 
dividends that should be stable. 

"What may justifiably be done in 1908, when the prices 
of the cost items have somewhat fallen and at the same 
time the volume of traffic has contracted is a more intri- 
cate problem. Doubtless if the decrease of traffic could 
fairly be regarded as permanent the foregoing analysis 
might justify an increase in rates. As an expedient, how- 
ever, for offsetting a temporary diminution, such a raise 
would be parallel to the action of a wage-earner who 
should demand double his earlier wages on the ground 
that he was able to work only half time; socially speak- 
ing this principle would lead to an impasse. 

"If the railroads are really menaced with receiverships 
through a temporary restriction of traffic, this must mean 
merely that they have been allowing their capitalization to 
run overfar in the direction of fixed-charge forms in- 
stead of toward stockholdings." — H. T. Davenport. 

"Viewed in one way, this question is too simple to re- 
quire an answer, but I object to the application of the 
rule of three to such a complicated question as this. If 
this sort of figuring is permissible, let us do away with 
high salaried traffic managers and turn the office boy 
loose with a slide rule, and old schedule of rates, and the 
latest table of index numbers whenever a readjustment 
of railway tariffs seems to be desirable. If you want to 
prove that railroad rates should be increased in 1908 or in 
any other year, show that they were too low in 1907 to 
be properly remunerative on the basis of the real invest- 

107 



ment in railroads and don't attempt the impossible task 
of proving or assuming that they were all right ten op 
twenty years ago, with the exception that all the rest of 
your argument can be taken for granted." — Carroll W. 
Doten. 

"Such a comparison would presumably not at least 
show an advance. But the income of railways is not de- 
termined merely by the rate charged but by the volume 
of traffic. In a general way there is an impression that 
the railways are doing pretty well — in view of the present 
condition of industry — and I fear that an advance in 
rates would be resented. If there were an absolutely im- 
partial tribunal which would determine rates on scientific 
lines (as indicated in the present inquiry) the case might 
be different. But trained and scientific judgment in these 
matters is hardly known in this country, and when urged 
is often denounced. In some measure the railways have 
themselves to blame for this state of things." — Garrett 
Droppers. 

"I think a reduction. The foregoing line of thought 
seems to me stronger against a reduction in nominal rail- 
way rates than it is in favor of an advance. At least it 
shows that the railways have shared with the public the 
economies of the last ten years. Whether the railways 
have shared too generously with the public so that they 
are fairly entitled to advance rates at the present time is 
a point upon which I would not presume to pass without 
detailed study. The extent to which the carriers have 
shared their economies with the public, the effect of an 
advance in rates upon the volume of traffic, the disturb- 
ing effect upon industries in general, the effect upon re- 
turning • prosperity, these with other things should be 
taken into the account along with the depreciation of 
gold." — C. F. Emerick. 

108 



"Under the conditions assumed above, real railway 
rates would certainly show a reduction since 1897. With 
Tegard to your whole problem, allow me to say that I feel 
there can be no question as to the fact of the deprecia- 
tion of the American dollar since 1897 and of the fact 
that railway rates have not risen to correspond. Assum- 
ing that railway rates were equitable in 1897, it would 
follow that an increase in rates would be equitable to-day. 
This conclusion, however, depends entirely on the judg- 
ment as to the fairness of rates in 1897, and I do not wish 
anything that I have written to be construed into an ex- 
pression of opinion that the railways would to-day be jus- 
tified in raising their rates." — Fred R. Fairchild. 

"There has been real reduction, if rates (nominally) 
have advanced less than the (nominal) advance in general 
prices and wages (and other incomes) of those who pay 
railway rates, even if railway equipment, fuel, etc., had 
not risen in this ratio. That is the rise or fall of railway 
rates is primarily a rise or fall to the public not to the rail- 
way. Whether or not this rise or fall corresponds to rise 
or fall of railway operating expenses is another question 
concerning which I have no special knowledge." — Irving 
Fisher. 

"It all depends upon how much railway service a given 
amount of railway line and equipment now performs. By 
amount, I mean value invested, with some allowance for 
the slight element of risk in rational railway construction. 
If, for example, the density of freight traffic has doubled, 
then the nominal railway income has increased from one 
dollar to two dollars and twenty cents, that is, by one 
hundred and twenty per cent; and although the cost of 
what railways purchase has increased thirty-five per cent, 
the real railway income has increased much. And this is 
the sort of comparison we make, or should make, when 

109 



we distinguish nominal from real wages and nominal 
from real prices. In my judgment, your questions taken 
together, make an improper use of the term rates in sug- 
gesting a close analogy to wages." — Willard C. Fisher. 

"Reduction." — J. D. Forrest. 

"A reduction." — A. G. Fradenburgh. 

"A reduction." — George P. Garrison. 

"It would indicate a reduction." — David I. Green. 

"Other things remaining equal the comparison would 
show relative reduction." — Lewis H. Haney. 

"I cannot answer this question, giving the situation as 
a whole. To the best of my information, railroad rates 
jrequire just as much adjustment and review at this time 
as does the tariff, and I believe on careful investigation it 
will be found that many railroad rates should be in- 
creased, and that many more should be reduced. In 
other words, a general adjustment as to time, distance 
and commodities is necessary and advisable to do equal 
justice to the railroads and to the people." — W. O. Hart. 

"It would undoubtedly show a reduction in value re- 
ceived for service rendered by transportation companies. 
But reasonable economy — operation, higher prices for 
subsidy lands received free and held without cost, and the 
concession of over-capitalization of properties tend to 
mitigate the apparent injustice of depressed railway 
charges and earnings — in the face of advancing costs of 
operation and maintenance." — R. H. Hess. 

"Reduction." — Joseph French Johnson. 
no 



"Such a comparison would show a substantial reduction 
if the character of the materials used, and the character 
of the services rendered to the railroads and by the rail- 
roads at the two periods were essentially the same. 

"In the interpretation of this answer it should be noted 
that ( i ) a long haul is cheaper per ton-mile than a short 
haul and that the length of the haul has shown a ten- 
dency in recent years to increase, (2) that low grade 
traffic can be handled more cheaply than high grade traf- 
fic, and that there has been a tendency in recent years to- 
ward an increasing proportion of bulky traffic and (3) 
quoting the Report of the United States Industrial Com- 
mission (XIX, p. 277) : '* * * * Increase in the vol- 
ume of business enables the railroad to perform the ser- 
vice at a constantly decreasing cost. Reliable computa- 
tions show that from two-thirds to three-fourths of the 
expenses of railroad operation are entirely independent of 
the amount of traffic moved. This being the case, such 
expenses having once been covered it costs the railroad 
for additional business little more than the mere cost of 
conducting transportation, as it is called. As a result, 
any increase of business above a certain figure, yields far 
more than a proportionate rate of profit." — E. W. Kem- 
merer. 

"The statistical answer to this question is that real rail- 
way rates show a relative reduction. By statistical an- 
swer I mean the answer which one has to give if he con- 
siders society as a whole paying for railway services. 
The conditions described might exist, however, and repre- 
sent an advance for individual shippers. This would be 
the case where the price of the product of the individual 
shipper had not advanced proportionately with the price 
of other things, including railway service. There might, 
on the other hand, be shippers whose products had so ad- 
vanced in price that, relatively to the value of the railway 

III 



service to them, $1.10 might be a less proportion of their 
cost of production than $1.00 thirteen years ago. In other 
words, the answer that there is a relative reduction is an 
average answer, and an average answer might not fit any 
individual. 

"Moreover some railway service may be rendered at 
smaller cost of production to the railway than it was 
thirteen years ago, even though the prices of equipment 
and labor had gone up. Improved processes might off- 
set the increased cost due to these higher prices. This is 
a question of fact to be determined before a conclusive 
answer can be given to your question." — David Kinley. 

"I can only answer this question as I answered ques- 
tion No. 6. Allow me to state, however, that the cost of 
transporting freight on railways in this country depends 
not only on the wages paid for labor and the expense of 
equipment and fuel, but it depends also upon the amount 
of freight to be transported, and the condition of the rail- 
ways, and their rolling stock." — M. A. Kursheedt. 

"A reduction. This seems to be a 'catch' question for 
the purpose of ascertaining whether we, who fill out these 
blanks really grasp the difference." — Charles H. Leeds. 

"Reduction."— W. H. Lough, Jr. 

"The comparison would show a 'real' reduction in 
rates. This reduction was probably justified by increase 
in volume of traffic (up to 1907) and by recurring econo- 
mies of administration and management." — Roswell C. 
McCrea. 

"Assuming the facts as stated, evidently the real rail- 
way rates have declined unless the current rates of inter- 

112 



est on securities similar in character to railway bonds 
have declined, which was not the case between 1897 and 
1907. 

"But this comparison does not indicate what is a 'fair 
rate' because the standard of comparison, the average rate 
in 1897, is not known to have been fair, and a 'general 
rate' is delusive because the circumstances of railways 
vary." — John Martin. 

"Comparing 1897 with 1907 the figures would certainly 
show a reduction in real railway rates. Whether the rela- 
tive reduction is greater than the public has a right to de- 
mand from railways is another question. Density of traf- 
fic and the kind of traffic are all important. Back loading 
and low rates on heavy cheap freights bring down the 
^rate per ton-mile, simply by employing the plant more 
nearly up to its capacity. As long as the railroads find 
that it pays to carry this traffic at the cheaper rates, there 
is no occasion to push the rates up. It must not be for- 
gotten that the transportation business is a quasi-public 
business. Changes in rates must be made with caution. 
For that reason, I favor a physical valuation of the roads, 
not as a means of attacking the railroads, but as a means 
of protecting them if necessary against legislative raids, 
by determining the vexed questions, propounded by the 
Supreme Court, but never answered by that august body, 
as to what is a reasonable rate, a fair income, and a just 
basis for estimating both rates and income." — Royal 
Meeker. 

"A reduction. In an unpublished article on railroad 
rate regulation written two or three years ago, it so hap- 
pened that I anticipated the answer to this question as fol- 
lows: 'At a time when the general purchasing power of 
money is declining (as it is with us now) an advance of 
the average money price charged for transportation not 

ii3 



out of line with the general advance of prices, is no real 
advance of rates at all. A slight advance of prices of 
transportation which is less than the average advance of 
prices of other things bought and sold (which has re- 
cently taken place on our railroads) constitutes actually 
a decline in rates. The railroads are performing the same 
social service, in these circumstances, for a smaller real 
recompense.' " — Charles W. Mixter. 

"According to the data at hand and the hypothesis pre- 
sented, real railway rates have steadily decreased. Of 
this I think there can be no question." — James B. Mor- 

MAN. 

"On the supposition that there were no improvements 
in the technique of the railway business, and that real 
railway rates are as I have, defined them, the data fur- 
nished in your example, if I understand it correctly, 
would indicate a real reduction of twenty-five per cent 
along side of the nominal increase of ten per cent. As the 
improvement in technique is a factor to be reckoned with, 
I think that all things considered there would still be a re- 
duction." — George S. Moynahan. 

"A reduction looked at from the point of view of the 
railway, the railway employee or the producer of railway 
equipment, fuel or materials. To discover the real ex- 
tent of the reduction from the point of view of the rail- 
way, it would be necessary to ascertain the rates of re- 
turn to capital in the respective years, and the relative 
importance of payments for the use of capital as compared 
with those for labor and supplies. 

"The data given in this question do not show whether 
rates have fallen when measured by the labor or com- 
modity cost of the services obtained to those who obtain 
them, but other figures in your circular letter and other 

114 



statistics of wages and prices prove that they have — that 
is to nearly all purchasers of transportation. ,; — H. T. 
Newcomb. 



"It is right here, so it seems to me, that your whole ar- 
gument breaks down. It does not follow because wages 
and materials of equipment cost more than in 1897, that 
the cost of a unit of transportation is greater. 

"1. Does not a train of say twenty cars and one engine, 
with regular appointment of men and fuel, do much more 
business and bring in much larger total cash returns, when 
well patronized as it has been since 1897, than it did when 
practically empty, as it was before 1897? 

"2. Does not an improved engine hauling a much longer 
train bring in cash returns larger in proportion than did 
the smaller engine and its shorter train? 

"3. Does not the roadbed, carrying twice as many 
trains a day pay its own share of the expenses of trans- 
portation and leave a larger surplus to reduce the real 
expense (per unit of weight and distance) of transporta- 
tion? 

"4. For these and other reasons may not the real pro- 
fits of the railroad be greater at the same rates even 
though the general prices be higher ?" — L. W. Parish. 

This is a mere question of mathematics, provided inter- 
est rates remain at the same level as in 1897. The an- 
swer is clearly: you have a reduction." — Julius H. Par- 
melee. 



"According to the hypothesis, the real railway rates 
would certainly show a reduction." — Warren M. Per- 
sons. 

"5 



"If your answer states conditions 
"Variable expenses 66x1.35 $0.89 
"Fixed 34x1.00 .34 



$1.23 
'Rates 1. 10 



"Failure of rates to keep pace by thirteen cents. 
"But grant an advance in traffic and the result may 
well be the other way." — Carl C. Plehn. 

"I think a decline decidedly. This does not mean that 
an increase in nominal rates would be necessary, for in- 
creased business might overcome the difference. I am in 
sympathy with Mr. Brown, of the New York Central, and 
believe that his position is fair and reasonable and in the 
long run the best for shipper, consumer and the Nation 
as a whole." — Jesse E. Pope. 

"Reduction of nearly twenty-five per cent interest." — 
H. H*. Powers. 

"The comparison would indicate a reduction. This 
reduction may be equitable or inequitable, according to 
changes of costs of transportation due, and other fact- 
ors." — L. G. Powers. 

"The answer depends on other factors not given." — 
Lawson Purdy. 

"Improvements in machinery cause a less proportion 
of labor to service now than formerly and the deprecia- 
tion in value of road and especially of equipment call for 
less capital. Hence the question is not a fair one." — H. 

W. QUAINTANCE. 

116 



"This would mean a decrease in the real railway- 
charges since 1897." — Charles Lee Raper. 

"A reduction. All the above argues for an increase in 
rates, for pooling of earnings, for combination of railways 
into larger systems; but it does not argue against a 
tamed-down governmental supervision. I believe the peo- 
ple are justified in requiring the railroads to keep up more 
detailed accounting systems, to give fuller reports, all of 
the same uniform arrangement, and to be more honest 
with each other. As a stockholder in several systems, I 
welcome such things. I know better where I 'am at' ; but 
perhaps it is not too much to say that the public ought to 
pay for more information with more cash. The general 
feeling among the common people is that rates are none 
too high, but have been partial or discriminating. There 
is growing up a pretty general feeling that the railroads 
are sinned against and sinning, and that both must di- 
minish, even at considerable cost." — Walter T. Ray. 

"Real railway rates, granting this postulate, would 
doubtless show a decrease." — Gardner Richardson. 

"A reduction, saving, however, this reservation: that 
if the interest charges of the railways had become rela- 
tively less in the interval, or if important economies were, 
meanwhile, effected, as, for instance, by improvements in 
business methods or mechanical appliances, or through a 
heightened ratio of ton-mileage to trackage operated — 
then such factors should be taken into the account in as- 
certaining the extent of the reduction, or in determining 
whether or not a virtual reduction was effected by the 
given alterations in the freight rates and the related 
prices." — Philip A. Robinson. 

"I don't like this way of putting it. In stage coach 
days, perhaps, half the prices currently paid for commodi- 

117 



ties were barely sufficient to remunerate the shipper. With 
every improvement since transportation charges have been 
lowered and properly so. 'Real railway rates' are not a 
fixed percentage of the prices of commodities carried. If 
you ask if under these circumstances the railways are 
fairly open to criticism for advancing their rates, I 
should say, 'No/ unless they were making very large 
profits before, they have shown great moderation in in- 
creasing their charges only one-tenth when their costs 
have risen, according to your statement, more than one- 
third." — Henry R. Seager. 

"Granting what is assumed in this question, I would 
say that the value which the railroad receives for a given 
service is less. This, it seems to me, would warrant no 
conclusion, however, as to the reasonableness or unrea- 
sonableness of railway rates, since other matters would 
have to be considered." — J. Allen Smith. 

"This is a question in arithmetic, not in political econ- 
omy." — N. I. Stone. 

"A reduction but not necessarily more than other 
changes warrant; such as increased numbers of cars 
per train and increased services in relation to fixed 
charges." — George S. Sumner. 

"A reduction." — Frank J. Symmes. 

"In effect it would show a reduction whereas the cost 
of providing the service had risen thirty-five per cent, 
the charge for the service would have been increased to 
the public only ten per cent. 

"One question you do not ask and one kind of infor- 
mation of importance here you have omitted. With in- 
crease of population and business, the amount of traffic 

lift 



for the railroads must have greatly increased since 1897. 
It occurs to me that in this the railroads should have 
found considerable compensation for increased cost of 
providing the service rendered. Still, this compensation 
might not more than offset the difference above allowed, 
in that a ten per cent raise in charge for service is set 
forth against a thirty-five per cent rise in cost of provid- 
ing the same." — J. A. Tillinghast. 

"The meaning of the question is not clear, as is shown 
by my answer to the first question. Therefore, I cannot 
answer it." — Edson Newton Tuckey. 

"Reduction, of course. Q. E. D."— E. B. Waller. 

1. 10 



"It would show a reduction in the proportion of 1.35= 
.815 by 18.5 per cent. 

"I think, however, that in reality the reduction has not 
been so great as this, and that if we offset the probably 
too high rates in 1897 and the improvements and econo- 
mies since effected, the rates are not yet seriously too low. 
But they may become so if the rise of general prices con- 
tinues, and then a gradual raising of rates would be justi- 
fiable. The difficulty of raising railway rates is a reason 
why railway managers should set themselves in opposition 
to all measures that tend to increase the depreciation of 
the money standard, such as enlarging the facilities for 
the banks to put out more bank notes. A period of rising 
prices due to augmentation of the supply of metallic 
money (gold) is a proper period for diminishing the sup- 
ply of credit currency." — C. M. Walsh. 

"A reduction. The principle is the same and produces 
like results whether applied to an individual or a body 
corporate." — A. J. Warner. 

119 



"This may be solved by the ancient rule of three, and 
most high school boys in the first grade can do it as well 
possibly better than I, hence I will not make the at- 
tempt." — D. C. Westenhaver. 

" 'Real' railway rates (using under protest Mr. Mer- 
ritt's distinction) have probably fallen since 1897. They 
certainly have on your assumption, which is probably sub- 
stantially correct. But two further questions at once fol- 
low, though you do not include them here. 1. Are the 
rates ton-mile rates? If so, much finite analysis is re- 
quired for safe reasoning. If Mr. Merritt's 7.80 mill rate 
came from a total that included a relatively great amount 
of low-grade long haul freight, it may have been a high 
'real' rate, using the word Veal' now to indicate another 
very important and valid distinction. The cost of hauling 
this would clearly have been relatively low, and the rate 
high in proportion to energy expended. 2. Has the gener- 
ally increased business of railways in the last ten years 
made what was earlier a low rate into a high one. The 
railways cannot set themselves up as a peculiar institu- 
tion in the matter of fixing specific rates (what the traffic 
will bear, a principle to which I assent) and then deny 
their corresponding peculiarity when it is a question of 
general level of rates. 

"In conclusion, I should like to dissent from the posi- 
tion of the New York Evening Post and certain other 
imperfectly educated economists in their assumption that 
increasing rates may not be economically wise, from the 
point of view of the railways — if the dear people will not 
protest too much. It seems to me that some of these edi- 
torial friends studied their economics before the theory 
of monopoly had been developed, and when it was too 
hastily assumed that the general principles valid for in- 
tensely competitive industries were universally valid. It 
seems to me absolutely unescapable that an increased rate 

120 



may not curtail even a depression volume of traffic suf- 
ficiently to prevent an increase of net earnings. 

"As I said at the beginning, these words are not care- 
fully weighed, but written curriente calamo; but the ideas 
that they very roughly express have been long in my 
mind and often expressed. Moreover, there are many 
other points which you do not touch upon that seem to me 
so intimately involved with these that your failure to in- 
clude them will defeat your purpose, assuming as I do 
that your purpose is honest, unbiased inquiry." — George 
Ray Wicker. 

"Striking out the word real above, since it is of doubt- 
ful significance, the cost of transportation to the shipper 
has declined provided the values of commodities in gen- 
eral have changed in the ratio of i.oo to 1.35." — M. S. 
Wildman. 

"Unquestionably a reduction. What's the use of going 
to school and being a goose." — A. B. Woodford. 

"A reduction. However, we must take into considera- 
tion the volume of freight to-day as compared with 1897 
before we conclude that rates are too low to-day because 
they are really lower than they were in 1897 when we ad- 
mit that they were not too high." — Lester W. Zartman. 



121 



ANALYSIS OF ANSWERS. 
By the Editor of the Railway World. 

The initial impression likely to be left by a perusal of 
the foregoing pages undoubtedly gives full recognition to 
the wide divergencies of opinion which they disclose. 
Extensive as these differences at first appear, it is believed 
that a closer study will reveal the fact that, excluding a few 
answers which exhibit a bias so evident as plainly to de- 
prive them of all value, the differences are superficial 
rather than actual. Thus, the form of the first question 
unquestionably suggested distinctions of terminology 
which seemed of such considerable importance to some 
of those whose answers are published as to warrant more 
or less discussion of definitions. Those who answered the 
first question with an unqualified affirmative were not, it 
is to be presumed, unaware of these distinctions but, it is 
probable, that in spite of these distinctions, the question 
appeared to them to express a vital principle with suffi- 
cient clearness to warrant a categorical reply. As to the 
principle involved there is plainly no difference between 
the unqualified affirmative of President Andrews, Profes- 
sor Bullock, Dr. Crowell, Professor Irving Fisher, Profes- 
sor Meeker, Professor Plehn, Dr. LeGrand Powers and 
the responses of Dr. Adams, Professor Daniels, Mr. New- 
comb and Professor S eager, although the last four named 
are typical of those who considered some discussion of 
terminology expedient. These differences in no way de- 
tract from the value of this compilation. 

Excluding from consideration such merely formal or 
superficial differences as those just discussed the conclu- 
sions seemingly warranted by underlying harmonies to 

122 



be found in the opinions are clear and definite. All of 
those whose answers to the first question are deserving of 
weight are plainly of the opinion that the value of money 
fluctuates from time to time and varies as between differ- 
ent places so that comparisons of wages, prices or rail- 
way rates are likely to be deceptive unless these differen- 
ces in purchasing power are examined and made a part 
of the subject matter compared. This conclusion is so ob- 
viously in accord with common sense and with the weight 
of economic authority from Adam Smith to the present 
day as to need no further argument. 

Equally clear is it that the conclusions of those best 
qualified to throw light upon the second question are that 
the distinctions between "nominal" or money wages, 
prices and railway rates, on the one hand, and "real" or 
purchasing power wages, prices or railway rates, upon 
the other hand, are of such high intrinsic importance that 
neglect to take them fully into account destroys all basis 
for comparisons. As a matter of fact this conclusion was 
made inevitably necessary by the answers to the first ques- 
tion. 

The third question carried the inquiry a step further 
by asking whether the American dollar has depreciated 
since 1897. Here, too, whatever difference appears is 
one of definition rather than of reality. All seem to agree 
that there has been a notable rise in prices and wages and 
nearly all realize that appreciation of commodities and de- 
preciation of standard money are synonymous terms. The 
very few who regard value as a quality persisting as in- 
variably in the standard dollar (that is to say, in 23.22 
grains of fine gold) as the quality of length persists and 
remains constant in the yard stick or that of weight in 
the standard pound avoirdupois have not failed to find 
representation but the "it is an insult to ordinary intelli- 
gence to suggest that the dollar could depreciate" of Dr. 
Quaintance is only typical of a state of mind which re- 

123 



jects commonly accepted definitions. It is outweighed by 
the "Yes" of Professor Dewey, Professor Irving Fisher, 
Professor Johnson, Professor Meeker, Dr. Mixter, Mr. 
Purdy, Professor Plehn, Professor Seager and Dr. Em- 
erick; by the "Undoubtedly" of Professor Bullock, Dr. 
Cummings, Professor Daniels, Professor Garrison and 
the "Most certainly" of President Andrews. One could 
not wish higher sanction for an economic proposition than 
its complete acceptance by these distinguished students 
and the others who agree with them. But even Dr. 
Quaintance did not mean to assert that the purchasing 
power of the dollar has not declined. To do so would be 
to contradict the common experience of a decade, the ob- 
servation of every American citizen, and official and pri- 
vate statistics of conceded accuracy. What he really 
meant was to deny that the value of the dollar is its ratio 
in exchange with other commodities and to assert that it 
is a permanent quality attaching to the quantity of metal 
made the unit of prices, just as length or breadth or 
weight or hardness attach to the same quantity of the 
same metal. This would do very well if the terms "price," 
"value," "depreciation," et cetera, had acquired no real 
and definite meaning but to seek to give them new mean- 
ings now is a fruitless task which, if sucessful, would 
only lead to confusion similar to that which would fol- 
low general interchanges of the names and significance 
of the Arabic numerals. 

It was to have been expected that the fourth question, 
the first to ask for a quantitative answer, should lead to 
greater disagreement. All agree that the dollar now has 
diminished purchasing power but the extent of the dimi- 
nution or depreciation, naturally appears differently to 
observers of varying outlook. The effort to reconcile the 
divergent estimates would be useless but it is fairly ac- 
curate to say that the best opinion seems to unite upon a 
depreciation of from twenty-five to thirty per cent. This 

124 



is probably sufficiently accurate for all general purposes. 

Agreement is also evident upon the substantial conclu- 
sion that those wages, prices or rates which have not been 
adjusted to the diminished value of the dollar are really 
lower by reason of such lack of adjustment. "Deprecia- 
tion of real income" is an expressive term applied to this 
condition by Dr. Willard C. Fisher while Dr. H. H. Pow- 
ers responds to the effect that fixed prices, wages and 
legal rates which cannot be modified except with difficulty 
have generally been lowered. The answers to this, the 
fifth question, are not easily summarized but they all sup- 
port the conclusion that injustice and hardship attach to 
absence of compensatory adjustment to meet the changed 
value of standard money. 

Those who answer the sixth question agree, with few 
exceptions, upon the statement that the general level of 
railway charges was not too high in 1897. Some have 
regarded it as necessary to modify this conclusion by al- 
luding to complaints alleging injustice in the relative 
charges for different services but this, of course, intro- 
duces a question of another sort which has no possible re- 
lation to the present inquiry. The sole value of this ques- 
tion, as a step in the inquiry now in hand, is to establish 
whether or not the railway charges of 1897 constitute a 
fair basis of comparison. That they are generally ac- 
cepted as a fair basis for that purpose is plainly demon- 
strated by these answers. 

The seventh question was regarded by some as merely 
a simple example of the "rule of three" and by others as 
requiring considerable analysis and not admitting of a 
concise and unequivocal answer. The most interesting 
suggestions are based upon a rather wide departure from 
the inquiry and introduce a qualification which, though 
really unsound, may appeal to many readers. This is, 
perhaps, as well illustrated by the answer of Dr. Willard 
C. Fisher, as any other. This answer seems to imply that 

125 



if the economic pressure due to a decline in rates brought 
about by a depreciation of the medium of exchange has 
compelled economies sufficient to permit the profitable con- 
tinuance of the industry the railways have no right to ask 
for higher returns. This is equivalent to asserting the right 
of the traveling and shipping public to confiscate all the 
economies of the most efficient management. How long 
this principle could be carried out in practice without re- 
ducing all railway management to a dead level of ineffi- 
ciency and eliminating all chance or hope of further pro- 
gress in methods or management constitutes an interest- 
ing speculative problem. That it would produce such a 
result sooner or later is, however, quite beyond question. 
No such condition as that suggested is now under con- 
sideration. The subtle operation of monetary deprecia- 
tion has reduced railway rates to the unprofitable point. 
"The forces bringing about the rise of prices will neces- 
sarily lead to a rise of railroad rates — or to railroad bank- 
ruptcy/' said Professor Joseph French Johnson, one of 
the ablest of American economists, in response to the sec- 
ond question. "It will first check improvements and ulti- 
mately bankrupt the roads," writes Dr. Mixter, treating 
of a continuance of present conditions and tendencies, and 
"failure to take into account this distinction may bank- 
rupt a road, stop dividends and thus cause financial dis- 
turbance; or, in case dividends are continued, needed im- 
provements or extensions may be stopped," declares Pro- 
fessor Pope. These are the real, actual, controlling con- 
ditions. They are the conditions which must determine 
the policy of this newspaper in this crisis and ought to de- 
termine the attitude of every intelligent American, what- 
ever his personal interest or wherever that interest might 
otherwise lead. 

The American dollar has lost from twenty-five to thirty 
per cent of its purchasing power since 1897 ; it is worth 
that much less in the treasury of any railway to-day than 

126 



it was ten years ago. Railway rates, expressed in dollars 
and cents are about where they were in 1897 or slightly 
lower ; therefore, such rates have gone down with the pur- 
chasing power of the money in which they are paid. The 
employees of railways are not generally overpaid, the 
prices of railway materials and supplies cannot be sub- 
stantially reduced; railway improvements and extensions 
costing immense aggregates are demanded by the public 
and ought to be supplied. These facts, amply supported 
by the results of the inquiry here submitted, lead unmis- 
takably to the conclusion that the schedules of railway 
freight rates must be revised; that there must be some 
compensatory adjustment to make up, in part at least, for 
the extensive fall in the value of the American dollar. 

EDWARD G. WARD. 

Railway World, 
Witherspoon Building 
Philadelphia. 

February 20, 1909. 



127 



